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No.7, 2008 (general serial No. 31): Audit Findings on the 2007 Budget Enforcement and Other Financial Revenues and Expenditures of 49 Government Depar
2009-04-13日   Soure : :

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of

49 Government Departments

(Public Announcement Dated September 5, 2008)

Table of Contents

1.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the National Development and Reform Commission

2.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Education

3.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of Former Ministry of Information Industry

4.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Ethnic Affairs Commission

5.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Public Security

6.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Supervision

7.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Justice

8.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Finance

9.       Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of Former Ministry of Labor and Social Security

10.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Land and Resources

11.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Former State Environmental Protection Administration

12.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of Former Ministry of Construction

13.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of Former Ministry of Communications

14.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Railways

15.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Water Resources

16.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Agriculture

17.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Commerce

18.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Culture

19.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Ministry of Health

20.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the National Population and Family Planning Commission

21.   Audit Findings on 2007 Financial Revenues and Expenditures of the People’s Bank of China

22.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State-owned Assets Supervision and Administration Commission of the State Council

23.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Administration of Taxation

24.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the General Administration of Quality Supervision, Inspection and Quarantine

25.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Administration of Radio, Film and Television

26.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Administration of Work Safety

27.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the National Bureau of Statistics

28.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Intellectual Property Office

29.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the National Tourism Administration

30.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Overseas Chinese Affairs Office of the State Council

31.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Legislative Affairs Office of the State Council

32.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Chinese Academy of Sciences

33.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Chinese Academy of Social Sciences

34.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Development Research Center of the State Council

35.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Meteorological Administration

36.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Banking Regulatory Commission

37.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Securities Regulatory Commission

38.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Insurance Regulatory Commission

39.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the National Natural Science Foundation

40.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Tobacco Monopoly Administration

41.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Oceanic Administration

42.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Post Bureau

43.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the State Council Leading Group Office of Poverty Alleviation and Development

44.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Federation of Literary and Art Circles

45.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Chinese People’s Association for Friendship with Foreign Countries

46.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Disabled Persons’ Federation

47.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China Council for Promotion of International Trade

48.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the China International Publishing Group

49.   Audit Findings on 2007 Budget Enforcement and Other Financial Revenues and Expenditures of the Supreme People’s Procuratorate

Audit Findings on 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

National Development and Reform Commission

Pursuant to the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) carried out the audit on the 2007 budget enforcement and other financial revenues and expenditures of the National Development and Reform Commission (hereinafter referred to  as the NDRC) from December 2007 to March 2008, and conducted a selective audit on 13 affiliated units.

1. Overall Situation

The NDRC is a first-level budget entity of the central finance, and its budget is composed of those of the Commission itself and 27 second- level budget entities.

The audit found that the NDRC’s budget revenues and expenditures in 2007 were in the main in conformity with the provisions of the state laws on budget, finance and economy, and the accounting practice was basically in line with the Accounting Law, associated accounting standards and accounting system. Furthermore, it well organized the NDRC’s budget planning, enhanced the budgetary and financial management, established and improved relative rules and regulations. It enhanced the training of accounting personnel, and took a serious approach to solve  the problems found in the previous annual audit. However, the audit has also found certain problems which needed correction and improvement.

2.       Main Audit Findings

(1) It failed to timely clear up the balances from the previous-year fund for capital construction to the amount of 24.0072 million yuan .

The NDRC left unused for a long time in its administrative current account 24.0072 million yuan  of balance from the financial fund used to build two construction projects before 2000: a public facility in Sanlihe District One and the Conference Center of the System Reform Institute in Hainan without timely settlement. Later on, the Conference Center project was cancelled due to change in situation, but the construction of the Sanlihe project had been completed long ago.

(2) The balance from the real capital to the amount of 76.7048 million yuan was not included in the budget for overall management.

The real capital balance the NDRC had in years prior to 2007 at the Commission level amounted to 76.7048 million yuan, but it failed to include the money in its budget for comprehensive arrangement and application. Of this amount of money, 34.2147 million yuan were balance in the administrative current account, 16.8003 million yuan were balance in the basic account of public service institutions, and 4.3834 million yuan were in the international activity current account, and 21.3064 million yuan were in the current account for retired personnel expenditures.

(3) There were 12.1124 million yuan earmarked for revision and review over business benchmark project left unused.

Originally, the industry department of the NDRC planned to finish the project on business benchmark revision and review in 2007and 2008. The funding was not submitted for approval annually as required, and, instead, it drafted the funding budget in a single submission in 2007; furthermore, it disbursed the full amount to the project implementation unit, rendering the money unused. It was found after a selective audit on ten project units including the China’s Machinery Industry Association that they had received project funding amounting to 20.3370 million yuan in 2007, and they had actually spent 8.2246 million yuan , which meant there was a balance of 12.1124 million yuan (59% of the funding) yet to be disbursed to project implementation units.

(4) Some reserve fund for medications was left unemployed.

In 2003, the Ministry of Finance had appropriated to the NDRC 77.8764 million yuan to be used for special reserve of certain medications. However, the NDRC cut back on the quantity of the purchase on the basis of the actual consumption, causing a balance of 64.7547 million yuan unused (83% of the disbursed amount). As of the end of 2007, the balance remained in the NDRC’s basic account without application.

(5) The Guohong Tower failed to carry out final account.

The Guohong Tower project was approved for construction by former State Planning Commission in November 1994, and it had paid financial construction resource totaling 953 million yuan . The Tower was made available in September 2000, however, as of the end of 2007, there was no final account prepared for that project after its completion, and the 61.5817 million yuan of balance had not been dealt with.

(6) The Macro-economic Economic Institute had lent to others overseas, and lost 2.9185 million yuan in investment.

In 1992, the Macro-Economic Institute invested 3 million yuan in Rizhao City, Shandong province for a training building. But subsequently, the project was scrapped for various reasons. As of 2007, the 346.7 thousand yuan of the invested money were not able to be recovered, making a lost on the investment.

In 1994, the Institute lent 2.22 million yuan to its affiliate—the China’s Hualian Real Estates Development Company. As of the end of 2007, that company endured a heavy loss and failed to honor its repayment commitment. Hence, the lending became a loss.

In 1994, the Land Development and Regional Economy Research Institute of the Macro-Economic Institute lent 400 thousand yuan to Xinxing Soft Drink Plant in Heze City, Shandong province. As of the end of 2007, the Institute failed to recover 351.8 thousand yuan , and the money went to a lost.

3.       Audit Decisions and Recommendations

With reference to the above-mentioned problems, the CNAO has timely come up with its audit report, and handed down its audit decision pursuant to the state law as well as rules and regulations As regards the unsettled balances from the previous years’ capital construction, it committed the NDRC to hand in to the central treasury 50% of the balances. As for the failure to include the real capital balance in the budget for overall planning, the NDRC has been asked to  report the balance carrying from the last year when drafting its budget, and make a comprehensive arrangement of those funds, so that the budget preparation could be more accurate and integral. With regard to the unused money earmarked for the project on the revision and review of business benchmark, the NDRC has been required to further itemize the budget in future, so as to ensure a scientific and accurate arrangement of budgetary funds, and it has also been asked to monitor the employment of the project money, prompt the associations of business to timely allocate project funding. As for the unused money used for medication reserve, the NDRC has been asked to consult the Ministry of Finance and others for a settlement to avoid the long-time inactivity of the fund. When it comes to the Guohong Tower whose final account for the completed project is yet to be made available, the NDRC has been requested to promptly complete it for examination and approval by the responsible department, and deal with the balance as required. As regards the overseas lending and loss in the investment on the part of the China’s Macro-economic Institute, the NDRC has been asked to report on the loss as required for approval to write off the amount, and the personnel concerned should be held accountable.

In response to the audit findings, the CNAO proposes: the NDRC needs to have an overall –planning of financial balances, raise the efficiency of fund application, improve relevant management procedures, upgrade the management level of ear-marked funds, and further enhance and regulate business accounting and management.

4. Implementation of Audit Decisions and Recommendations

The NDRC did make self-examination prior to the audit, and corrected some problems. As for the audit findings, the NDRC has given great attention to them, engaged in planning the ratification on a number of occasions, called on its units to improve the situation by taking practical steps. As regards the untimely operation on the balances carried over from the previous years, it has paid into the treasury to the amount of 12.0036 million yuan . As for the failure of including the real capital balance for overall budgetary planning, a settlement is being under consideration. With regard to the unused money originally ear-marked for the project on revision and review of business benchmark, the unit concerned has been prompted to speed up the progress, and keep a close watch. As for the unused money earmarked for medication reserve, the NDRC is studying various options, alongside departments concerned, to bring the reserve into its functions. As regards the final account uncompleted by the Guohong Tower, it has finished drafting the final account, and handed in the 9.642 million yuan of balances to the central treasury. With regard to the overseas lending and loss in investment on the part of the China’s Macro-Economic Institute, the NDRC is in the process of handling the issue in accordance with rules and regulations.

In addition, regarding other mismanagement problems found by the CNAO, the CNAO has prepared an additional letter of recommendations, the NDRC is addressing them accordingly.

Audit Findings of the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

Ministry of Education

In accordance with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (hereinafter referred to in the text as “the CNAO”) conducted the audit on the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Education (MOE) from December 2007 to March 2008. Besides, and carried out a selective audit on 10 affiliated units.

1.       Overall Situation

The Ministry of Education is a first-level budget entity of the central finance, and its budget is composed of those of the Ministry and 103 second-level budget entities and project implementation units.

The audit has found that the MOE’s 2007 budget revenues and expenditures were largely in conformity with the state budget and financial statutory regulations. Its accounting practice was basically in line with the provisions of the accounting law, related accounting standards and accounting system. It performed well in organizing budget formulation and reporting, and enhanced the budget and financial management, streamlined its internal control system, took a serious approach to solve the problems found in the previous audits. However, the CNAO has also found some problems calling for correction and improvement.

2.       Main Audit Findings

(1)  There were 7.142 billion yuan of budget fund that failed to be itemized to the specific units and projects at the beginning of the year, leading to incomplete budget submissions launched by the budget enforcement units at the beginning of the year.

In the 2007 budget of the MOE, there were 7.142 billion yuan of the budgetary fund that failed to specify to the detailed units and projects at the beginning of the year. Of this amount 5.5 billion yuan were planned for “Education Boosting Action Program”, 1.46 billion yuan were scheduled for the project of  “Repairs and Purchase of the Universities, Middle Schools and Primary Schools”, 182 million yuan for “The Special Fund for Publicity of Cultural Development” Project with the result that those project implementation units failed to come up with complete budgets at the beginning of the year.

(2) The Ministry’s dining hall expansion project failed to take place as scheduled rendering 20.7 million yuan unused.

In April 2007, the Ministry of Finance approved the request of the MOE to alter and expand its dining hall with a budget of 20.7 million yuan . However, due to the project changes , that project was not implemented in that year resulting in the inactivity of that funding.

(3) From the project of national review of primary and middle school textbooks and prize-awarding examination on outstanding educational achievements, there were an accumulated balance of 7.5667 million yuan from the financial appropriation, an equivalent of 2.52 times to the financial input appropriated in that same year.

From the MOE project of national review of primary and middle school textbooks and prize-awarding examination on outstanding educational achievements there were 5.2954 million yuan of balance at the beginning of 2007. In the same year, there was an appropriation of 3 million yuan , and the outlay was 728.7 thousand yuan , meaning there was a balance of 2.2713 million yuan . Beyond that, the cumulative balance at the end of year amounted to 7.5667 million yuan , which was equivalent to 2.52 times to the financial input given in that year.

(4) The MOE-affiliated Central Broadcasting and TV University failed to submit its plan for its capital construction project, and the 192 million yuan thus incurred from that construction project was not covered by the budget for management.

From March 2005 to July 2007, without going through the financial department for review for its financial sources and reporting to the planning department on its capital construction investment plan, the University has spent a cumulative amount of 192 million yuan out of the budget to buy education facilities , and the whole amount of money was not included in the MOE’s budget.

(5) The MOE-affiliated Central Conservatory of Music charged fees to the amount of 801thousand yuan without authorization.

From 2002 to 2007, the Conservatory’s Modern Distant Learning Music Education Academy charged fees for preliminary examination amounting to 801 thousand yuan without authorization during its cooperation with others in running the Academy.

3.       Audit Decisions and Recommendations

With reference to the problems, the CNAO has come up with an audit report and handed down its audit decision in a timely manner in accordance with the state law as well as rules and regulations. With regard to the failure of itemizing the project budget to specific units and projects at the beginning of the year, the MOE has been asked to take immediate steps to consult the departments concerned so as to manage the budget in an orderly manner. As for the unused balance from the untimely implementation of the dining hall expansion, the MOE has been asked to make a better feasibility study on future projects so as to avoid unused funds. As regards to the oversize balances from the project for the National Review of Primary and Middle School Textbooks and Prize-awarding examination of outstanding educational Achievements, the MOE has been requested to have an overall consideration of the project balances in its future project submissions with a view to improve fund application efficiency. As to the failure of the Central Broadcasting and TV University to report its plan for capital construction investment project and to include the related expenditure in the budget for management, the MOE has been asked to commit the CBTVU to make a supplementary submission for its capital construction investment project. When it comes to the unauthorized collection of fees on the part of the Central Conservatory of Music for its own project, the MOE has been requested to commit the Conservatory to stop this practice. If it has to charge fees, it needs to report to the department concerned for approval in strict compliance with the rules and regulations.

The CNAO has made the following recommendations with regard to the problems found by the auditors: The MOE should improve budget formulation, enhance its control over the project submissions, approvals and implementation as well as other management links, promote fund application efficiency, keep a watchful eye on the universities’ cooperative endeavor in running school and tighten its control on the review and approval procedure for fee collection.

4.       Implementation of Audit Decisions and Recommendations

The MOE carried out a self-examination prior to the audit, and corrected those identified ones. As to the audit findings, the MOE has taken them seriously and addressed them in a serious manner. As for the failure to itemize the budget to specific units and projects at the beginning of the year, after consulting the Ministry of Finance, part of the projects had been itemized at the beginning of 2008, and the remaining ones will be detailed in the budgets in subsequent years. As for the unused balance from the untimely alteration and expansion of the MOE dinning hall, the MOE has filed to the Government Offices Administration of the State Council and Beijing municipal planning department for approval pending its alteration and expansion. As regards the oversize sum of balances from the project on national review of primary and middle school textbooks and prize-awarding examination of outstanding achievements, steps have been taken to readjust the budget. As for the failure of the MOE-affiliated Central Broadcasting and TV University to submit its capital construction investment project for approval, the University has been asked to report the plan to the higher institutions for approval in accordance with the procedure. As regards the unauthorized collection of fees by the Central Conservatory of Music for its own project, the Conservatory has been committed to file application to the municipal department concerned in Beijing, and it is now under consideration.

In addition, the CNAO has sent out a letter of recommendations regarding other mismanagement problems found by the auditors, and the MOE has tackled them accordingly.

The Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of

Former Ministry of Information Industry

Pursuant to the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted audit of the 2007 budget enforcement and other financial revenues and expenditures of Former Ministry of Information Industry (known as Ministry of Industry and Information Technology now) from December 2007 to March 2008, and carried out a selective audit on 34 affiliated entities.

1.       Overall Situation

Former Ministry of Information Industry (hereinafter referred to as “the MII” in the text) was a first-level budget entity of the central finance, and its budget was composed of those of the 61 second-level entities.

The audit has found that the 2007 budgetary revenues and expenditures of Former Ministry of Information Industry basically complied with the state budgetary law and financial rules and regulations, and its fiscal practice was largely in line with the provisions of the accounting law, relative accounting standards and systems. The MII performed well in organizing the budgeting commitment of the ministry, carried out a firmer control over budgetary and fiscal management, established a sound set of rules, and took a serious approach to the problems found in the previous audit. However, the audit has found certain problems calling for correction and improvement.

2.       Main Audit Findings

(1) The budget plan contained non-budget entity projects.

In the 2007 budget plan of former MII approved by the Ministry of Finance, there were budget for 14 capital construction projects of non-budget entities to the amount of 36.60 million yuan .

(2) The balances of 337.0653 million yuan from 30 former MII-affiliated provincial telecom authorities failed to be included in the Ministry’s budget for management.

In the 2007 budget plan of 31 former MII-affiliated provincial authorities, there were balances from 30 authorities to the amount of 337.0653 million yuan that failed to be included in former MII’s budget for management.

3.       Audit Decisions and Recommendations

In view of the above problems, the CNAO has timely come up with its audit report and sent its audit decision in accordance with the state law as well as rules and regulations. As regards the projects of those non-budget entities, the former MII has been asked to consult the Ministry of Finance and other departments to properly handle the relationship of appropriations between various budget entities. As for the failure of 30 provincial telecom authorities to include their balances for management by former MII budget, the Ministry of Industry and Information Technology (MIIT for short) has been asked to do so.

With regard to the above problems, the CNAO proposes that the MIIT should further standardize its budget formulation, so as to exert an overall planning of financial input and their prudent spending in a practical manner.

4.       Implementation of Audit Decisions and Recommendations

Former MII had carried a self-examination prior to the audit, and corrected the problems thus found. As for the audit findings, the MIIT has taken them seriously. As regards the projects of non-budget entities contained in the MII budget submissions, it is consulting the Ministry of Finance for correct treatment of the fund-appropriation relationships. When it comes to the failure of the MII to include in its budget the balances from 30 provincial telecom authorities, it had included them in its budget for management when drafting the 2008 central government departmental budget.

Besides, the CNAO has sent a letter of recommendations to the MIIT regarding other mismanagement problems, and the latter has already addressed them accordingly.

The Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

State Ethnic Affairs Commission

In accordance with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) performed the audit on the 2007 budget enforcement and other financial revenues and expenditures of the State Ethnic Affairs Commission (hereinafter referred to as “the SEAC” in the text) from December 2007 to March 2008, and it carried out a selective audit over four SEAC-affiliated entities.

1.  Overall Situation

The SEAC is a first-level budget entity of the central finance, and its budget is composed of those of the Commission and 20 second-level budget entities and project implementation units.

The audit has found that the 2007 budgetary revenues and expenditures of the SEAC basically complied with the provisions of the state budget law and other fiscal rules and regulations. Its fiscal practice tallied largely with the accounting law, related accounting standards and fiscal systems. It was able to well organize the budget formulation and submission of its own department, enhance the budget and financial management as evidenced by formulation and revision of 19 sets of procedures regarding financial management over recent years and its serious approach to the problems found in the previous annual audits. However, the auditors have also found some problems calling for correction and improvement.

2.       Main Audit Findings

(1) The illegal spending of 941.9 thousand yuan earmarked for the ethnic work to the capital construction project.

In 2007, the SEAC converted the usage of 941.9 thousand yuan from ethnic work to security protection and building shielded computer room in its “Northern Building Project ”.

(2) The SEAC appropriated the printing expenses in the name of budget expenditure.     

In 2007, the SEAC appropriated 401.9 thousand yuan of printing expenses in the name of budget expenditure to its affiliate—the Office Service Bureau’s Document Printing Service, and the latter actually spent 306.1 thousand, leaving a balance of 95.8 thousand yuan in that same year. The sum totaled 119.3 thousand yuan at the beginning of this year, and registered 215.1 thousand yuan at the end of the year.

(3) The problems existing in the SEAC-affiliated Central Ethnic University.

a. In 2006, The Central Ethnic University converted 195.8 thousand yuan earmarked for equipments purchase of three buildings including the Polytechnic Science for the equipment purchase for the International Education Academy Building and Overseas Student Building which went beyond three designated buildings.

b. As of the end of 2007, the Central Ethnic University had failed to hand in 25.4468 million yuan as required to the special financial account, of which most came from the extra-budget revenues including tuitions and accommodation fees.

c. It took illegal rebate from the capital construction project to the amount of 7.7226 million yuan , of which 1.9578 million yuan were kept back.. In some capital construction projects, the University and the project bidders were agreed before the project invitation for bid that once the bidder won the project, it would give rebate to the University in the form of grants for the benefit of education. The rebate would not be included in the tender. As of the end of 2007, the University had got 7.7226 million yuan in rebate from those successful bidders, of which 5.7648 million yuan were spent as the expenses for its Humanities Course building whose construction was finished in March 2006. And 867.8 thousand yuan were used on the project for postgraduate students’ dorm whose construction was completed in December 2003, and 1.09 million yuan were used in building students’ dorm (for overseas students) in September 2003. Those two construction projects spent the rebate of 1.9578 million yuan , and all of them were regarded as “grants” and credited into the account for university public service institutions.

d. The University-affiliated Logistics Industry Group collected depreciation fees in violation of the provisions made by Government Offices Administration of the State Council concerning the exemption of the fixed assets of the public service institutions from depreciation. As of the end of 2007, it had collected 4.6617 million yuan , of which 1.2926 million yuan were obtained in 2007, and 3.3691 million yuan prior to 2007. The University paid all the amount of depreciation fees to the Group when settling accounts with the Group.

(4) Problems existing in the Central Ethnic Ensemble of Music and Dance.

a. The Central Ethnic Ensemble of Music and Dance expanded spending scope in 2007 by employing special financial fund—the Business Subsidy to the amount of 134 thousand yuan , of which 70.8 thousand yuan were spent on overseas travel training, and 63.2 thousand yuan were used on reception fees.

b. The Ensemble failed to include 10.6742 million yuan of revenues and expenditures in the budget for management.

The tuitions, accommodation fees and other miscellaneous fees submitted by the Ensemble-affiliated Art Training School were considered as part of the Ensemble’s current account. It had received a total of 10.6742 million yuan from 2005 to 2007 (of which 3.1323 million yuan were obtained in 2007 alone). It spent 7.5654 million yuan on personnel, day-to-day public expenses (of which 2.5068 million yuan in 2007). And by the end of 2007, it registered a balance of 3.1087 million yuan .

c. Problems existing in the Art Training School.

1) It collected illicit fees amounting to 1.4489 million yuan. The School in its cooperation with other schools charged excessive tuitions for college and middle-level certificate classes amounting to 613.1 thousand yuan in 2007, and it collected middle-level certificate class tuitions to the amount of 304.4 thousand yuan with long overdue Fee-Collection Permission. From 2006 to 2007, it had set up fee-collection items on its own and got 96 thousand yuan as depreciation for its fixed assets (of which 21.6 thousand in 2007), and from 2006 to 2007, it overcharged tuitions and miscellaneous fees to the amount of 435.4 thousand yuan (of which 29.8 thousand in 2007).

2) It put 802.9 thousand yuan in private deposit. From September 2005 to December 2007, the School retained for its own use 802.9 thousand yuan of revenue (of which 326 thousand in 2007), and spent 636.6 thousand yuan on personnel, public expenses and other expenses (of which 217.1 thousand in 2007). At the end of 2007, it had a balance of 166.3 thousand yuan . Besides, it had an off-the-book account of 59.7 thousand yuan without any voucher.

(5) The Office Service Bureau affiliated to the School collected illicit fees amounting to 2.43 million yuan in the name of “use of assets” from the National Ethnic Commission Hostel.

On the basis of the decision made by the SEAC, the Commission’s Hostel was merged in the Central National Ethnic Commission Training Institute in 2004. In 2006, the Office Service Bureau started colleting fees to the amount of 2.43 million yuan in the name of “use of assets” from the Hostel that had yet to be handed over, and spent it on the allowances and subsidies of the staff from the SEAC-affiliated Information Center and Retired Personnel Bureau. 

3.  Audit Decisions and Recommendations

With reference to the problems, the CNAO has timely prepared an audit report and sent down an audit decision pursuant to the state law as well as rules and regulations. The SEAC has been asked to return to their original funding sources the earmarked funds diverted to the capital construction, the money misappropriated as expenses, the funds taken by the Central Ethnic Ensemble of Music and Dance and Central Ethnic University from the financial fund and spent beyond limit as well as the illicit depreciation fees that the Central Ethnic University paid to the Logistics Industry Group, and to write off or carry forward the related accounting items. As for the failure of the Central Ethnic University to hand over  the extra-budget revenues to the special financial account as required, the SEAC has been required to follow this practice. As for the problems existing in the Ensemble-affiliated Art Training School, the SEAC has been called on to stop such illicit collection of fees, return the overcharged fees, tuitions and miscellaneous fees and fixed assets depreciation fees, and speed up the application for the fee-collection license, recover the money retained without approval, adjust the related accounting items, and hold accountable those personnel concerned. With regard to the receipt of rebate on the part of the SEAC-affiliated Central Ethnic University from the capital construction projects and retention of some rebate commission, the SEAC has been asked to return the rebate, and strictly follow the law concerning bid and tender, and stop to get rebate from the capital construction projects. With regard to the failure of the Art Training School of the Central Ethnic Ensemble of Music and Dance to include the collected fees and their expenditures in the budget for management, the unit concerned has been called on to include the tuitions and other income as well their expenditures in the budget, and have the accounting items re-adjusted. As for the illicit collection by the SEAC Office Service Bureau of the so-called fees for “use of assets” from the SEAC Hostel, the SEAC has been asked to strictly abide by accounting law and related rules and regulations.

In view of the above problems, the CNAO proposes: the SEAC should make effort to improve its budgeting and fiscal oversight, and take practical steps to have a better management of its affiliates while the latter needs to raise their awareness of budget management, and should manage and employ funds in strict compliance with the accounting system.

4. Implementation of Audit Decisions and Recommendations

The SEAC had a self-examination prior to the audit, and corrected the problems thus found. As to those audit findings, the SEAC has addressed them seriously by calling SEAC staff meetings to listen to the audit report . It has sent a Circular Note for Enforcement of the 2007 Audit Decision, calling on all units to raise awareness of the law so as to prevent any recurrence of these illicit acts; take a serious study on the outstanding problems and weak links in fiscal management, strengthen the internal guidance to and monitoring of the independent business accounting entities in particular so as to improve the internal control mechanism. For the time being, the most problems found by the auditors have been addressed, and the remaining ones will be handled in a fixed time. The SEAC will keep up its internal audit, and has circulated a Key Points for the SEAC 2008 Internal Audit, and is conducting the audit on those outgoing legal representatives of the units concerned in terms of their economic responsibilities as per the Interim Procedures for Audit of the Economic Responsibilities of the Leading Members of the SEAC-Affiliated Entities.

In addition, the CNAO has sent a letter of recommendations with regard to other mismanagement issues. The SEAC has already addressed most of them accordingly.

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

Ministry of Public Security

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Public Security (MOPS) from December 2007 to February 2008, and it audited five of its affiliates through selection.

1.       Overall Situation

The MOPS is a first-level budget entity of the central finance, and its budget is composed of those of the Ministry and 32 second-level budget entities.

The audit has found that the MOPS did reasonably well in enforcing its 2007 budget. Its replies to budget requests were fast, and had a high approval rate. Both the Ministry and its affiliated entities had fairly sound internal control and financial management. Its accounting practice was in line with relevant standards and systems. The auditors had not found any prominent violations against the law. It could strictly abide by the management code of “separating revenues from expenditures”. The financial fees collected throughout 2007 had been handed over to the central treasury. As regards to the audit findings of the 2006 budget enforcement audit, the MOPS had called on the entities concerned to take steps to address them. However, the auditors have also found certain problems calling for correction and improvement.

2.       Main Audit Findings

(1) It appropriated 16 million yuan to a non-budget entity.

In 2007, the MOSP disbursed project funds amounting to 16 million yuan to a non-budget entity—the MOPS Information Center for MOPS Information Center and MOPS Office Local Area Network (LAN), Metropolitan Area Network (MAN) as well as Satellite Network Repair and Maintenance.

(2) It readjusted the budget fund on its own involving 17.2 million yuan .

In 2007, the MOPS readjusted without permission the budget purpose of “ Ministry Compound Restructure Project” to finance gardening facilities renovation and Dashanzi base alternation that were not included in the Compound Restructure item, and the whole readjustment involved 17.20 million yuan .

(3) The MOPS income of 1.7463 million yuan was given to the affiliated entity for business accounting without its inclusion in the MOSP-level for overall management.

From 2005 to 2007, the MOPS got 946.3 thousand yuan of proceeds from project budget for special topic and special police demonstration, and the money was taken care of for business accounting by the MOPS’s First Research Institute. In 2007, the MOPS gained 800 thousand yuan from its sponsored training course and martial art course, and the money was left in the care of the Chinese People’s Public Security Academy for business accounting. The total amount of 1.7463 million yuan was not covered by the MOPS budget for management.

(4) A certain second-level budget entity affiliated to the MOPS spent 8.2866 million yuan without any budget expenditure.

a.       Unauthorized use of the net project balance amounting to 5.7631 million yuan .

In 2007, the MOPS-affiliated second-level entity employed without authorization the net project balance from safety protection engineering works and others resulting in an outlay of 5.7631 million yuan .

b. Use of project balance from unbudgeted expenditure of 2.5235 million yuan .

From 2003 to 2005, the same second-level entity used the project balance to pay for the unbudgeted landscaping project, incurring the expenditure of 2.5235 million yuan .

(5) Failure of one MOPS-affiliated second-level entities to include the revenue of 3.9899 million yuan in the budget for management.

In 2007, a certain second-level entity affiliated to the MOPS came by 2.09 million yuan from surveillance training and 1.8999 million yuan of other earnings (of which 1.8672 million yuan were from the house demolition compensation), and failed to include the amount into the budget for management.

3.       Audit Decisions and Recommendations

The CNAO has given its audit report and made audit decision in accordance with the state law, rules and regulations in a timely manner in response to the above problems. As for the appropriation to non-budget entity, the MOSP has been called on to recover the balance fund. As to the readjustment of the purpose of the budget item, the MOPS has been asked to file supplementary application for approval. As for the accounting practice conducted by an affiliated entity concerning Ministry-level budgeted expenditure, the MOPS has been required to recover the balance and include it in the budget for management. With regard to the unbudgeted expenditure of a certain second-level entity, the Ministry has been requested to make amends by filing for approval. As to the failure of a certain second-level entity to include its income in the budget, the unit concerned is asked to follow the practice.

In light of the audit findings, the CNAO proposes: the MOPS needs to further itemize its budget, so that the budget readjustment and funding change can find the ground, correctly handle the relationship between the Ministry level and second-level entities and have a clear treatment over the current account and accounting entries.

4.       Implementation of Audit Decisions and Recommendations

The MOPS made a self-examination before the audit, and corrected the problems thus identified. As for the audit findings, the MOPS has taken them seriously. It called meetings to deliberate on the ways to address them, committed the units concerned to take a conscientious approach. With reference to the appropriation given to non-budget entity, the unit concerned has been asked to stop spending the money, and made an item-by- item check on those expenses already incurred. As for the budget readjustment and change in the fund application, the MOPS is coming up with relative application procedures. As for the accounting practice of the Ministry-level income and expenses entered by the affiliated unit, the balance has been recovered and incorporated into the budget for management. As regards to unbudgeted expenditures made by some certain second-level entity, the MOPS is in the process of going through the supplementary formalities. When it comes to the failure of a certain second-level entity to include its income in the budget for management, the money has been included after its accounts checked.

In addition, the CNAO has sent a letter of recommendations to the MOPS on other mismanagement problems, and the latter has addressed them accordingly.

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

                            Ministry of Supervision

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) carried out audit of the 2007 budget enforcement and other revenues and expenditures of the Ministry of Supervision (hereinafter referred to as “the MOS” in the text) from January to February 2008, and it audited two affiliated entities through selection.

1.       Overall Situation

The MOS is a first-level budget entity of the central finance, and its budget is composed of those of the Ministry and three second-level budget entities.

The audit has found the MOS 2007 budget revenues and expenditures complied with the state budgetary and financial laws. Its accounting practice was basically in line with the accounting law, related accounting standards and fiscal rules and regulations. It could well organize the budgeting of the Ministry, further enhance the budgetary and fiscal management, establish and improve relative systems, and addressed seriously the problems found in previous annual audits. But the auditors have also found some problems calling for correction and improvement.

2.       Main Audit Findings

(1) It readjusted the budget items on its own involving 800 thousand yuan .

In 2007, the MOS converted the money earmarked by the Ministry of Finance for the office building’s cooling machines registering 800 thousand yuan to external renovation of its office building façade without authorization.

(2) It failed to include the prepaid overseas expenses to the amount of 442.6 thousand yuan into the MOS fiscal accounts for overall business accounting.

In 2007, the MOS International Affairs Bureau failed to include prepaid 442.6 thousand yuan into the Ministry’s fiscal accounts for overall business accounting; and instead, it had kept a special account in the Bureau.

(3) The MOS-affiliated Beijing Training Center over-withdrew 2.6651 million yuan from the repair and procurement fund.

In 2007, the Beijing Training Center included the training fees amounting to 17.7676 million yuan that should not be considered as depreciation in the fund for repair and procurement of depreciated assets, and withdrew the fund for repair and purchase at the ratio of 15%, and thereby exaggerate 2.6651 million yuan as expense.

3.       Audit Decisions and Recommendations

With regard to the above problems, the CNAO has timely produced an audit report in accordance with the state law and rules and regulations. As for the unauthorized readjustment of budget items, the MOS has been asked to adjust the accounting items by following strictly the approved budget. As to the failure to include the prepaid overseas expenses in the MOS-level finance, the MOS has been called on to include it in the Ministry-level budget for overall business accounting. As for the exaggerated expense by the Beijing Training Center from the repair and procurement fund, the unit concerned has been asked to return the money to the original source of funding, and have the related accounting item readjusted.

In view of the audit findings, the CNAO proposes: the MOS should raise its awareness of budget operation, have a better management of the budgeted items, and standardize the business accounting behavior so as to constantly improve the management .

4.       Implementation of Audit Decisions and Recommendations

The MOS had self-examination before the audit, and corrected the problems thus identified. The MOS has taken problems seriously as evidenced by the special meetings called by the leading members to discuss ratification work.  It has called on the units concerned to address the problems one by one and fix a time limit to solve each problem. As regards to the unauthorized readjustment of budget item, the MOS has returned the full amount of money used to beautify the building façade to the original funding source, and has reported to the Ministry of Finance for approval to use saved funds as financing of that project. As to the failure to include the prepared overseas trip expenses in the Ministry-level budget for overall business accounting , the MOS has cancelled the related accounting item of the International Affair Bureau and the money has been handed over to the Ministry-level finance for overall business accounting. As regards to the over-withdrawal of repair and procurement fund on the part of the Beijing Training Center, the Center has returned the money to its origin, and made corresponding adjustment of the accounting item.

Audit Findings on the 2007 Budget Enforcement and

Other financial Revenues and Expenditures of the

Ministry of Justice

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit office (CNAO) performed the audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Justice (MOJ for short ) from January to March 2008, and it also audited four MOJ-affiliated entities through selection.

1.       Overall Situation

The MOJ is a first-level budget entity of the central finance, and its budget is composed of those of the MOJ and 11 second-level budget entities.

The audit has found that the MOJ’s 2007 budget revenues and expenditures were basically in line with the statutory rules and regulations on budget, finance and economy, and its accounting practice was in the main in following the accounting law, related accounting standards and systems. It could well organize the Ministry-level budgeting, and had a better management of the Ministry budget and finance. Its internal control was relatively good, and could be carried out effectively. It had taken a serious approach to the problems identified by auditors in previous audits. But the auditors have also found some problems that warrant correction and improvement.

2.       Main Audit Findings

(1) There were 12.7078 million yuan on charge account for a long time and failed to be dealt with timely.

As of the time for audit, the judicial business fee amounting to 7.8234 million yuan that the MOJ had lent to the others prior to 2000 had been on charge account for a long time, of which 819 thousand yuan and 600 thousand yuan were lent to Huafa Co. and Zhongcheng Co. in 1996 and 1997 respectively. Due to the termination of those two companies, the money was not able to be recovered.

Besides, the 4.8844 million yuan returned to the Ministry from its former affiliates had been on charge account over five years, of which former Adoption Center had a balance of over 2 million yuan , and former Bar Examination Center had a balance of 268 thousand yuan , and a balance of 176 thousand yuan for police insignia-making by the court police department.

(2) It failed to appropriate 595.5 thousand yuan of special government allowance that should have been allocated.

As of the end of 2007, the total amount of special government allowance that should have been allocated reached 595.5 thousand yuan, most of which were disbursed from former Ministry of Personnel prior to 2004.

(3) The Crime Prevention Institute of the MOJ had outstripped its expenditures by 1.03 million yuan .

In 2007, the Crime Prevention Institute of the MOJ took money from the special scientific research expenditures amounting to 1.03 million yuan for overheads and utility fees that should have been disbursed from its day-to-day public expenditures.

3.       Audit Decisions and Recommendations

In view of the above problems, the CNAO has come up with an audit report in a timely manner in accordance with the state law, rules and regulations. As regards to overdue charge account, the MOJ has been asked to deal with it seriously and recover the money lent out in a fixed time frame. For those bad debts, steps should be taken upon approval of application, and the balance needs to be settled and carried forward as required. The MOJ has been further requested to timely appropriate the special government allowance that should have been given out. For those that was truly unavailable for allocation, the money should be returned to its origin after verifications. As for the outstripped outlays from the special scientific research expenditures on the part of  the MOJ Crime Prevention Institute, the MOJ has been called on to strictly adhere to the related state provisions.

With reference to the problems identified by the CNAO, the CNAO proposes: the MOJ needs to have a firm control over its budget, improve its state assets management, and comply with the relevant state policies and rules and regulations.

4.       Implementation of Audit Decisions and Recommendations

The MOJ had conducted a self-examination prior to the audit, and corrected the problems thus identified. As to the audit findings, the MOJ has taken them seriously and called on the units concerned to address them in a practical manner. With regard to the long overdue settlement of account, it has cleaned up the current account for judicial business fees, and taken measures to recover them in a fixed time. Failing to do that, it will file for cancellation as required by the prescribed procedures. As for the special government allowances that should have been appropriated, the balance has been dealt with, and letters have been sent out to the units concerned for verification pending final settlement. As regards the overspending of special scientific research expenditures on the part of the Crime Prevention Institute, the Institute will conduct its own business accounting of the expenditures in accordance with the statutory rules and regulations so as to secure the special purpose of such expenditures.

In addition, the CNAO has sent a letter of recommendations with reference to other mismanagement problems, and the MOJ has acted on them accordingly. 

Audit Findings on the 2007 Budget Enforcement and

Other financial Revenues and Expenditures of the

Ministry of Finance

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted the audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Finance (MOF for short) from February-March 2008, and audited 21 affiliated units through selection.

1.       Overall Situation

The MOF is a first-level budget entity of the central finance, and its budget is made up of those of the Ministry and other 52 second-level budget entities.

The audit has found the 2007 budgetary revenues and expenditures of the MOF complied basically with the state rules and regulations concerning budget, finance and economy, and its accounting practice was largely in line with the accounting law, related accounting standards and other accounting systems. It could well organize its budgeting work, enhanced the budgetary and fiscal management, and had a sound system in place. However, the auditors have also found some problems that call for correction and improvement.

2.       Main Audit Findings

(1) Budget formulation is not accurate, which cause a surplus balance of financial account registering 414.2741 million yuan by the end of 2007.

As of the end of 2007, the MOF had a budgetary balance amounting to 414.2741 million yuan . In 2007, the MOF’s had a budget of 255.8 million yuan for its four projects including the Financial Informatization project, the project on retaining social intermediary organ for asset stock-taking, engineering project for the refurbishment of the dilapidated housing in No 1 Zone 2 of Sanlihe, as well as the vouching and monitoring project. As a result of inaccurate budgeting formulation, only 83.7625 million yuan were spent, resulting in a surplus balance of 172.0375 million yuan , or 67% of the total budget.

(2) Budget formulation is not itemized enough, involving 63.2557 million yuan .

At the beginning of 2007, the MOF General Office failed to itemize special inspection and other funds to its 35 financial inspection commissioner field offices; and instead, the money was included in the MOF departmental budget. It allotted to the field offices in three supplementary installments totaling 63.2557 million yuan in the same year.

(3) The MOF failed to timely enter the fixed assets valued at 1.0690251 billion yuan for those projects whose construction had been completed and became operational.

By the end of 2007, the 23 capital construction projects that had been completed and put into functions from 1993 to 2007 involved a cumulative investment of 1.0690251 billion yuan, but none of them had gone through the formalities of final accounting. Furthermore, the relevant assets had not been entered as fixed assets items in business accounting nor had any of them had handed over any balance. The CNAO had pointed out in audit opinions long ago in 2003 that “the MOF failed to timely do the final accounts of those completed and operational projects, and their balances had not been submitted to the central finance as required”, and the MOF had been asked to commit its Office Service Center to timely deliver their final accounts, carry over to the category of fixed assets, and hand over the balances to the central finance. However, to this date, the Center fails to solve this problem in an all-around manner.

(4) There were 21 cars (for business use) which went beyond the officially authorized number.

As of the end of 2007, the MOF was authorized by the State Council Government Offices Administration to have a fixed number of 56 cars for business use ( including three for the use of ministerial-level retirees) , but it actually had 77 cars, meaning 21 above the fixed number, or an excessive rate of 37%.

(5) The MOF-affiliated Financial Science Research Institute collected unauthorized fees.

In 2007, the MOF-affiliated Financial Science Research Institute collected unauthorized tuition fees, optional master degree studies tuitions, commissioned training tuition for doctor-degree studies, thesis fees from part-time master-degree candidates (tutoring fees included), admission fees of doctor-degree candidates and audition fees from those non-Institute members, totaling 7.4238 million yuan .

(6) The MOF-affiliated Office Service Center illicitly entrusted a construction engineering consult entity without qualifications for engineering consultancy and designing expertise to conduct pre-construction consultancy and design for its capital construction project.

In 2005, the Office Service Center entrusted the Beijing Rui’anbo Construction Consultancy Center that had no qualifications for the pre-construction consultancy and design work to undertake those jobs for its Nanpeilou Building and meeting hall as well as floor-increasing alteration of other auxiliary structures. By the end of 2007, the former had paid a cumulative sum of 2.2401 million yuan .

(7) The MOF-affiliated Vouching and Monitoring Center failed to make budget for government procurement and strictly follow the government procurement procedure.

The Vouching and Monitoring Center listed 38.7 million yuan for vouching in its 2007 budget, but it failed to list the expenses in the government procurement budget. The actual vouching expenses for that year amounted to 25.8160 million yuan, of which 12.5380 million yuan occurred ranging from 100 thousand yuan to 1.2 million yuan for single printing costs in 31 batches, and for which no price assessment had been conducted as required. And 6.2363 million yuan occurred without second bid for pricing as required, in three batches whose single printing cost reached over 1.2 million yuan.

3.       Audit Decisions and Recommendations

In light of the above problems, the CNAO has prepared an audit report and handed down its audit decision in a timely manner as per the state law, rules and regulations. As to the financial balances caused by inaccurate budgeting, the MOF has been asked to strengthen its project feasibility studies and budget examination and approval work, and do its budget formulation in strict compliance with the procedure and standards, so as to cut down the surplus balances and the unused funds with a view to improve financial resource allocation and application. It has been further asked to include the balances into the budgets of subsequent years for comprehensive arrangement, do its best to submit an expense account and those matters for which accounts should be closed so that they could be dealt with as required. As for the failure to sufficiently itemize the budget, the MOF has been called on to make strict distinction between the MOF-level budget and those of its second-level entities, and itemize the budget by timely approving the budgetary submissions of affiliated entities. The MOF has been requested to timely close the accounts of those completed projects and enter them in the category of fixed assets, and hand over the balances of capital construction projects to the central treasury. As regards to the oversize car pool, the MOF has been asked to report to the State Council Government Offices Administration, and strictly follow the regulations and requirements. As for the unauthorized collection of fees, the MOF-Financial Science Research Institute has been demanded to file application for approval as per the regulations. With regard to the illicit outsource to unqualified entities to do the pre-construction consultancy and design of capital construction projects on the part of the Office Service Center, the MOF has been requested to commit the Center to enhance engineering consultancy and design management so as to root out the recurrence of similar cases. With reference to the failure of the MOF-affiliated Vouching and Monitoring Center to make government procurement budget and to strictly enforce the procedures for government procurement, the MOF has been asked to commit the Center to come up with the government procurement budget as required and go through the due procedures in future.

In view of the problems, the CNAO proposes: the MOF should improve itself-restrain, take a strict and serious approach in its budget formulation, upgrade the fund employment efficiency, have a sound internal mechanism, and take more efforts in following statutory financial and economic requirements as well as rules and regulations.

4.       Implementation of Audit Decisions and Recommendations

The MOF did make a self-examination before the audit, and identified the irregularities. As for the audit findings, the MOF has taken them seriously by calling special meetings, and committing the units concerned to take their correction and improvement. With regard to the balances caused by inaccurate budget preparation, it has made greater efforts to dispose of the balances as evidenced by the negative budget growth for years running under the circumstances of the 20% increase over the previous year in the number of financed project applications allowed by the policy, and the simultaneous efforts made to speed up the project funding disbursement as well as the efforts made to refrain from making additional financial appropriations, and instead, use the balances left over from previous years to address a certain number of additional expenditure items taking place in the process of annual budget enforcement. As to insufficient budget itemization, the year 2008 has already witnessed the strict distinction between the MOF-level budget and those of the affiliated units, the effort to itemize the budget as evidenced in its timely approval of budget requests. As regards to the failure to timely close the accounts of those completed capital construction projects and enter them into fixed assets, steps are being taken to go through the formalities for approval as required to treat them as fixed assets, and turn in the balances as a result of account-settlement. As regards the oversize car pool for business purpose, the report has been submitted to the Government Offices Administration of the State Council, and any ruling and demand will be acted on. As to the unauthorized collection of fees on the part of the Financial Science Research Institute, the Institute has filed to the relevant department with request for a single authorization for approval of fee-collecting pending the roll-out of regulations concerning the fee-collection items and standard of the schools run by State Council government department and agencies, commissions, academy and institutes. With regard to the outsource of its pre-construction consultancy and design of capital construction projects to the entity without such expertise, the department concerned has been called on to have a better management of engineering consultancy and design, and root out the recurrence of similar cases. When it comes to the failure of the MOF-affiliated Vouching and Monitoring Center to submit its government procurement budget and abide by the relevant procedures, the Center has been committed to do so in its future work.

Besides, the CNAO has also sent a letter of recommendations to other mismanagement problems found by the auditors, and the MOF has acted on them accordingly.

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of

Former Ministry of Labor and Social Security

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit office (CNAO) performed the audit of the 2007 budget enforcement and other financial revenues and expenditures of former Ministry of Labor and Social Security (known as the new Ministry of Human Resources and Social Security) from December 2007 to March 2008, and audited 13 affiliated units through selection.

1.       Overall Situation

Former Ministry of Labor and Social Security (“the Ministry” for short) was a first-level budget entity of the central finance, and its budget was composed of those of the Ministry and 18 second-level budget entities.

The audit has found that the 2007 budget revenues and expenditures of former Ministry of Labor and Social Security were basically in line with the provisions of the state law on budget, finance and economy, and its accounting practice was basically in accord with the fiscal law, relevant accounting standards and systems. Also, it had a sound system in place, and addressed the problems found in the previous audit in a serious manner. However, the auditors have also found some problems that call for correction and improvement.

2. Main Audit Findings

(1) It failed to approve the budget submissions of its affiliates as required.

During 2007 budget formulation, the four Ministry-affiliated units including the Labor Science Institute, the Institute of Labor and Wages, the Social Security Institute and the International Labor and Information Institute had made their respective budgets and submitted them to the Ministry. However, the Ministry in its replies followed the practice of the previous year by consolidating all the budgets and replying to former Institute of Labor Security Science which pertained to the same second-level budget entity, and refrained from giving direct approval to the four Institutes.

(2) The donation proceeds amounting to 20.55 million yuan were not included in the Ministry-level budget for management.

As of the end of 2007, the two Ministry-sponsored China Social Labor Security Forums had received donations from enterprises to the amount of 20.55 million yuan (of which 9.5 million yuan in 2007, and 11.05 million yuan in 2006). The above revenues and expenditures relating to those donations were not included in the Ministry-level budget for management. As of the end of 2007, the balance of 2.3779 million yuan remained in the current account of the Ministry-affiliated Social Security Capacity Building Center for business accounting. At the same time, there were fixed assets totaling 1.0874 million yuan established for the forums, but they were not entered as fixed assets in final account of business accounting.

(3) The project for the China-EU Social Security Capacity Building Center was not launched as scheduled, rendering the funding unused.

As per the approval by the National Development and Reform Commission, the Ministry should have launched the project for the China-EU Social Security Capacity Building Center with a investment of 78.64 million yuan at the end of 2006 . And the fact proved the Ministry of Finance had disbursed all the money to that project at the end of that year; however, as late as the end of 2007, that project had not been completed, causing the emergence of 18.7518 million yuan of unused fund.

(4) The credits of 238.0818 million yuan was not settled or paid back on account for a long time

As of the end of 2007, the Ministry had a total of 238.0818 million yuan that had been on the accounting item of “temporary advances” for a long time. Of which 225.5624 million yuan were balance at the end of 1999 from money lent out by the Ministry using the Central Production Support Fund, 12.5194 million yuan on account as “temporary advances” for a long time were the credits of the Ministry from 11 units involving five items such as overseas travel expenses and car purchase etc.

(5) 24.8147 million yuan debt owed by the Ministry were unsettled on account.

As of the end of 2007, the Ministry had debts in the name of “temporary savings” to the amount of 24.8147 million yuan on account for a long time. The money was related to more than 40 items including international service earnings, printing house contributions and fund use fees.

(6) There was a wide gap between the budgeted revenues from public service institutions and final accounts of the Ministry-affiliated China Vocational Training Skills Instruction Center and Ministry-affiliated Professional Skills Evaluation Center.

a. The China Vocational Training Skills Instruction Center formulated a budget of 5 million yuan in revenues from public service institutions for 2006, but actually made 22.8337 million yuan , meaning the revenues in the final accounts were 4.56 times to the budget revenues. The same Center had a budgeted earning of 5 million yuan for 2007, but that year saw an income of 22.0713 million yuan , meaning the revenues in the final accounts were 4.41 times to those of the budget.

b. The Professional Skills Evaluation Center had a budget income of 550 thousand yuan for 2006 from public service institutions, but it actually made 3.0389 million yuan in the same year, meaning the revenues in the final accounts were 5.52 times to those of the budget. The same Center had envisaged 700 thousand yuan from public service institutions for its 2007 budget, but actually got 6.5373 million yuan in the same year, meaning the revenues in the final accounts were 9.33 times to those of the budget.

(7) The Ministry-affiliated International Exchange Service Center had squandered and wasted money.

From November 2005 to December 2007, the International Exchange Service Center‘s affiliate—Beijing Ruixin Hengda Information Consultancy Co Ltd (“Ruixin” for short) bought Maotai liquor stored for 50 years, Zhonghua Brand cigarettes, cash cards, cell phone charging cards totaling 787 thousand yuan,, of which 472.1 thousand yuan were spent in 2007. Besides, the Center had an entertainment fee of 956.1 thousand yuan in 2006.

(8) The Ruixin Co Ltd failed to timely include in the account the training fee amounting to 142.4 thousand yuan for business accounting.

From October 2006 to 20 February 2008, the company failed to timely include in the account the training fees for business accounting, and instead, delayed the process by 1-3 months. As of 20 February 2008, the balance of training fees involved totaled 142.4 thousand yuan. After being brought to attention by auditors, the company had so include the balance into general accouting.

(9) The Ministry-affiliated Educational Training Center listed the illicit labor & service fees amounting to 602 thousand yuan .

From 2005 to January 2007, the Ministry-affiliated Educational Training Center had paid labor & service fees to personnel of the individual departments of the Ministry to the amount of 602 thousand yuan (the money was the training income included in the budget for management), of which 11.4 thousand yuan in 2007, 476.6 thousand yuan in 2006 and 114 thousand yuan in 2005.

3.  Audit Decisions and Recommendations

In view of the above problems, the CNAO has timely prepared an audit report and sent an audit decision in accordance with the state law and rules and regulations As regards to the failure to give a mandatory response to the budget requests of the affiliated units as required, the Ministry has been asked to improve the budget reply procedures. As to the failure to include the donations into the Ministry-level budget for management, the Ministry has been asked to do so, and incorporate the fixed assets occurred as the expenses in the Ministry-level books for business accounting. As for the termination of the China-EU Social Security Capacity Building Center project resulting in the emergence of unused fund, the Ministry has been asked to speed up the project construction. With regard to the failure of the Ministry as a creditor to timely recover the debts on account, the Ministry has been called on to clean up and settle the debts. With reference to the great gap between the budgeted revenues and those in the final accounts of the China Vocational Training Skills Instruction Center and the Professional Skills Evaluation Center, the units concerned have been asked to deal with their respective budgets in a rational manner. As for the serious money squandering by the International Exchange Service Center, the unit concerned has been asked to address the problem in accordance with the law. As to the failure of Ruixin Company to timely include the training fees in its books for business accounting, the unit concerned has been demanded to tighten its control. As for the illicit payment of labor & service fees on the part of the Educational Training Center, the unit has been asked to handle the matter with all its seriousness.

The CNAO has also made the following recommendations regarding the problems: the Ministry of Human Resources and Social Security should urge its affiliated units to further improve their budgeting work, to clean up one by one the debts left behind by former Ministry of Labor and Social Security as creditor, tighten its internal control and toughen its enforcement of financial law and discipline.

4. Implementation of Audit Decisions and Recommendations

Former Ministry of Labor and Social Security made a self-examination prior to the audit, and corrected the irregularities thus identified. As for the audit findings, the new Ministry has taken them seriously, calling on its affiliated units to take actions to implement the CNAO recommendations, and correct its irregularities as per the CNAO requests. Currently, the units concerned are in the process of doing so by improving rules and regulations on fiscal management rules, and regulate the budgeting process so as to secure strict budget enforcement.

In addition, the CNAO has sent a letter of recommendations regarding other mismanagement problems, and the Ministry has acted on it accordingly.

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of the

Ministry of Land and Resources

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Land and Resources from December 2007 to March 2008, and audited nine affiliated units through selection.

1. Overall Situation

The Ministry of Land and Resources (MOLAR) is a first-level budget entity of the central finance, and its budget is composed of those of the Ministry and 68 second-level budget entities.

The audit has found that the 2007 MOLAR budget revenues and expenditures were basically in line with the provisions of the state regulations on budget, finance and economy, and its fiscal practice largely follow the accounting law, related accounting standards and budget system. Furthermore, it was able to well organize the budgeting of the MOLAR, tightened the budget and fiscal control, had a sound system in place and took a serious approach to the problems found in previous year’s audit. However, the auditors have found some problems calling for correction and improvement.

2. Main Audit Findings

(1) Part of the affiliated units failed to include the income amounting to 157.7 million yuan in the budget for management.

In 2007, the Ministry of Land and Resources failed to include 14 units into its budget, including its affiliated units such as the Office Service Bureau and China Geology Society. On the basis of the data provided by the MOLAR, the income that those units failed to include in the budget for management amounted to 157.7 million yuan .

(2)  It failed to timely conduct closing procedure for the capital construction project in which 333.13 million yuan were invested.

From 2001 to 2002, the MOLAR completed five projects including reinforcement and refurbishment of the MOLAR office building, auxiliary structures and other capital construction projects, all of which were already put into use. The investment totaled 333.13 million yuan; however, so far the MOLAR has failed to close the accounts treatment relating to the completed projects.

(3)  It failed to give approval to the budget appropriation applications of the affiliated units involving 1.7461593 billion yuan.

In 2007, the Ministry of Finance approved a budget of 4.849525 billion yuan to the MOLAR and its affiliated units, but the MOLAR failed to abide by the requirement by giving its approval to the budget requests of affiliated units to the amount of 1.7461593 billion yuan within 15 days after receiving the Ministry of Finance approval.

(4) The MOLAR-affiliated Petrol & Oil Resource Strategic Study Center appropriated 128.6 million yuan of budgetary fund in lump sum instead of fund disbursement on the basis of project progress.

In 2007, the Center appropriated 128.6 million yuan to five units including the China Petrol and Natural Gas Co Ltd for the project on the nation-wide investigation and evaluation of strategically selected regions for oil and gas resources (but it failed to disburse the money according to the progress of actual project expenditure), and instead, it entered the entire amount as expenditure in project funding.

(5) The China Geological Academy-affiliated Geological Dynamics Institute (“Institute” for short) failed to include the business income to the amount of 1.9666 million yuan in the books for overall business accounting.

From 2003 to 2007, the Institute failed to include the earnings to the amount of 1.9666 million yuan made from housing rental operations in the accounting books for overall business management. It, instead, spent all the earnings on the staff wages of the logistics service center. As of the end of 2007, there was a net balance of 47.8 thousand yuan .

(6) The MOLAR-affiliated Land & Resources Newspaper Office caused a loss of 6 million yuan due to external investment.

In 2001 and 2003, the China Land & Resources Newspaper Office signed cooperative land development agreements with two companies respectively without authorization of the department concerned, instead of disbursing the amount of investment as scheduled in the contract; it paid 6 million yuan to them in advance. Now, this amount of money can not be recovered, causing a  great loss.

(7) The same newspaper office took a commission of 1.3783 million yuan from the advertisement fees paid for publishing the notice of mineral survey by the MOLAR, and distributed to an individual.

From 2000 to 2007, the Newspaper Office took a 20% commission in the name of an individual on the public notice fee for mineral survey allotted by the MOLAR, and paid 1.3783 million yuan to the vice director in charge of advertisements.

3.  Audit Decisions and Recommendations

In view of the above problems, the CNAO has timely prepared an audit report and sent down its audit decision in accordance with the state law as well as rules and regulations. As regards the failure to timely close the account for completed projects, the MOLAR has been asked to do so at the earliest date possible. As for the failure of the Dynamic Institute to include part of the operational income in the financial account for overall business accounting, the unit concerned was called on to clear relevant revenues and expenditures, and have the books readjusted. As to the commission taken from the fees paid by the MOLAR for the public notice concerning mineral survey to give to an individual under the Land & Resources Newspaper Office, the unit concerned has been demanded to take back the money given out illicitly.

With regard to the problems, the CNAO proposes: the MOLAR should tighten the control over its budget, push forward the overall budget reform, enhance the management of state assets and their returns, and take practical steps to have a better management of project funding so as to bring into full play the efficiency of financial input.

4. Implementation of Audit Decisions and Recommendations

The MOLAR made a self examination prior to the audit, and corrected the problems thus identified. The MOLAR has taken the audit findings seriously, by calling special meetings and committing the units concerned to address those irregularities in a fixed time limit. Steps are being taken to close the accounts of those completed projects. The Dynamics Institute has readjusted its books which involved failure to include certain operational earnings in the books for overall business accounting. Measures are also being taken to recover the illegal proceeds taken from the commission on the fee for public notice concerning mineral survey paid to the Land & Resources Newspaper Office by the MOLAR.

Besides, the CNAO has sent a letter of recommendations to the MOLAR about other mismanagement problems found by the auditors, and the MOLAR is acting on it accordingly.

Audit Findings on the 2007 Budget Enforcement and

Other Financial Revenues and Expenditures of

Former State Environment Protection Agency

In conformity with the provisions of the Audit Law of the People’s Republic of China, the National Audit Office conducted audit of the 2008 budget enforcement and other financial revenues and expenditures of former State Environment Protection Agency ( its new name is Ministry of Environmental Protection) from January to March 2008, and audited six affiliated units through selection.

1.       Overall Situation

Former State Environment protection Agency (SEPA) was a first-level budget entity of the central finance, and the Agency’s budget was composed of those of the Agency itself and 34 second-level budget entities,

The audit has found that in 2007 the SEPA was able to organize the Agency and other affiliated units to prepare the budget in accordance with the budget law and other statutory regulations, well organize the budget enforcement, made its efforts to improve the fund application efficiency. The SEPA’s budget management and fiscal accounting had been improved gradually, and its accounting practice was basically in line with the accounting law, relevant accounting standards and accounting system. It was also able to correct the problems found in the previous annual audit. However, the audit also has found some problems calling for corrections and improvement.

2.  Main Audit Findings 

(1) Three million yuan of project budgetary fund was fraudulently claimed through false report.

In 2005 and 2006, the former State Environmental Protection Administration (SEPA) claimed fraudulently three million yuan through false report in the project of nuclear and radiation safety technical examination and appraisal and illegally appropriated it as overheads to the radiation monitoring technical center of SEPA, which was established by SEPA itself.

(2) 21.78 million yuan of project budget was not adequately refined to specify the particular unit.

In 2007, the former SEPA applied in the name of the Administration for 21.78 million yuan of budgetary fund for the construction project of technical appraisal of environment impact assessment report. In the application, the budget was not sufficiently refined to specify the undertaking unit, the Environment Engineering Appraisal Center of SEPA, and the fund was allocated in a lump sum directly to the center.

(3) One-million-yuan project budget was drawn up and submitted for a non-budget unit.

In 2007, the former SEPA, taking the name of the Administration, drew up and submitted the budget of one million yuan for the project of “China Trans-century Environmental Protection Inspection Campaign” sponsored by the Environment and Resources Protection Committee of the Standing Committee of the National People’s Congress and appropriated in a lump sum the fund directly to the General Office of the Standing Committee of the National People’s Congress.

(4) 349,300 yuan for general administration and projects was misappropriated for payment of salaries of temporary staff.

Starting from April 2007, SEPA introduced a system of assistant secretaries by signing labor contracts in the departments and bureaus of the administration. In 10 departments and bureaus of the administration, 11 assistant secretaries were successively hired. The former SEPA misappropriated 349,300 yuan designated for general administration and projects to pay the salaries of these staff. By the end of 2007, 170,100 yuan had been actually spent with a balance of 179,200 yuan .

(5) 1.5 million yuan of revenue from housing rent of the Service Center of the former SEPA was transferred to its affiliated company.

In 2007, the Service Center of the former SEPA, in the name of its affiliated Beijing Guohuan Property Management Co. Ltd., leased out some rooms in a certain comprehensive building owned by the center, to the Environmental Emergency Response and Accident Investigation Center as offices and collected 1.5 million yuan as rent and other related charges.

   

3. Audit Decisions and Recommendations

With regard to the above problems, CNAO issued the audit report and audit decisions in a timely manner and in compliance with the relevant provisions of the state laws and regulations. In regard to the problem of claiming fraudulently project budgetary fund through false report, it was required that the relevant fund be turned over to central government finance. For the problems that the project budget was not refined adequately to indicate the particular unit and that project budget was drawn up and submitted for non-budget unit, it was required that the problems be corrected  through consultations with the Ministry of Finance and the related department of the Standing Committee of the National People’s Congress. Regarding the misappropriation of general administration fund for paying the salaries of temporary staff, the relevant department is requested to recover the remaining fund as the surplus of its departmental budget and that it should use fund in the future in strict compliance with the prescribed expenditures in the budget. With regard to the problem that the Service Center of the former SEPA transferred housing rent revenue to its affiliated company, the center is urged to retrieve the revenue and incorporate it in its budget for corporated accounting and management.

In view of the problems discovered in the audit, CNAO recommended that the Ministry of Environmental Protection further strengthen its internal control system, set up a strict internal restraining mechanism, improve the financial management system as well as reimbursement, examination and approval system, supervise and monitor its affiliated units more vigorously, boost routine financial management and enhance control over budget enforcement, check and overhaul the related units in a timely manner, further enhance training of top management team and relative staff on financial and economic laws as well as discipline and knowledge about budget and financial management, and strengthen the awareness of governance, administration and financial affairs treatment in accordance with laws.

4. Implementation of Audit Decisions and Recommendations

Prior to the audit, the former SEPA conducted relatively careful self-examination. The Ministry of Environmental Protection (MEP) took the audit findings seriously. During the audit, the ministry already addressed some of the problems. After the field audit finished, MEP in a timely manner studied and made arrangement to address the problems and drew up the plan for labor division in the work and required the various units to earnestly rectify the problems found in the audit, conduct self-examination and self-correction in depth, standardize management in terms of system and mechanism and push the cause of environmental protection toward a “scientific and refined” development. The project budgetary fund claimed fraudulently through false report was turned over to central government finance. The Ministry of Finance and the Standing Committee of the National People’s Congress were consulted for resolving the problems of inadequate specification of project budget to related unit as well as the problem of budget formulation and submission of for non-budget units. With regard to the problem of misappropriation of general administration and project fund for payment of salaries of temporary staff, the balance of the fund was retrieved as departmental budget balance of the unit and the system of assistant secretary of the department was revoked. As for the problem that the Service Center of the former SEPA transferred revenue from housing rent to its affiliated company, the fund was recovered from the company.

Moreover, CNAO sent out a separate letter of audit recommendations in regard to other problems of non-standardized management and MEP corrected them accordingly.

           Audit Findings on 2007 Budget Enforcement and Other

                    Financial Revenues and Expenditures of Former

                            Ministry of Construction

In compliance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008 the National Audit Office (CNAO) conducted an audit of the 2007 budget enforcement and other financial revenues and expenditures of the former Ministry of Construction (Now the Ministry of Housing and Urban-Rural Development, MHURD) and performed a selective audit of seven affiliated departments.

1. Overall Situation

The former Ministry of Construction was a first-level budgetary department of central government finance. Its budget was composed of that of the ministry itself and those of 15 secondary budgetary units.

The audit findings show that the 2007 budgetary revenues and expenditures of the former Ministry of Construction basically complied with the provisions of the relevant state laws and regulations on budget and finance and that its accounting practices basically accorded with the stipulations of the Accounting Law of the People’s Republic of China, related accounting standards and regulations. The ministry earnestly organized the formulation and submission of its budgets and approved budgets in a timely manner. It further stepped up budget and financial management, set up and improved related systems and earnestly rectified the problems found in the audits of previous years. However, the audit discovered some problems which need to be corrected or improved.

2. Main Audit Findings

(1) No timely final account of completed construction project was made.

At the end of 2003, the former Ministry of Construction completed 11 capital construction projects with an investment of 71.75 million yuan in budgetary fund. The actual used fund stood at 70.6887 million yuan with a balance of 1.0613 million yuan. The 11 projects were all put into operation, but at the time of the audit the final accounts of the completed projects were yet to be made.

(2) The Urban and Rural Planning Management Center of the former Ministry of Construction misappropriated 350,000 yuan of project expenditure on research topic fund for payment of international conference expenses.

The Urban and Rural Planning Management Center took 350,000 yuan, which it had received in July 2005 as research topic fund for “survey and study of sewage treatment and reclamation in small cities and townships”, as revenue of the organizing committee of the Fifth World Water Congress of the International Water Association and used the fund for the expenses of the organizing committee. At the time of the audit, 53,900 yuan was spent with a balance of 296,100 yuan.

(3) The revenues and expenditures of international conference were not brought under budget management and the balance of the conference was not turned over to the national treasury in whole sum.

The former Ministry of Construction undertook the convocation of the Fifth World Water Congress of the International Water Association. The congress had 28.418 million yuan of revenue and spent 11.7959 million yuan with a balance of 16.6221 million yuan. The above revenue, expenditure and balance were not put under budget control. On December 14, 2007, the Urban-Rural Planning Management Center of the former Ministry of Construction turned over only 9.9488 million yuan of the above amount to central government finance with the remaining sum not being settled with the International Water Association and handed over to central government finance.

(4) 102,600 yuan was spent without budgetary arrangement for expenses in appraisal.

In 2007, the Department of Urban Development of the former Ministry of Construction, without budget arrangement, spent 102,600 yuan from the Urban-Rural Planning Management Center of the former ministry for the work of urban landscaping appraisal.

(5) The final accounts of 1.9626 million yuan expenditure of research topic projects of the Ministry of Construction undertaken by five units were not accurate.

The final accounts of 1.9626 million yuan submitted by China Urban Planning Design Institute, Scientific and Technical Development Promotion Center, the Urban Development Professional Committee of the China Real Estate Association, China Public Works Engineering Association, all four of them affiliated to the former Ministry of Construction, as well as the Construction Comprehensive Survey and Design Institute for 21 research topic projects they undertook were not accurate.

(6) The Urban and Rural Planning Management Center affiliated to the former Ministry of Construction spent 999,600 yuan without formulating budget.

In the whole year of 2007, without formulating budget, the Urban and Rural Planning Management Center affiliated to the former Ministry of Construction disbursed 999,600 yuan, spent on “25th anniversary publicity activities for scenic spots”, out of the project expenditure of the “special fund for the examination and supervision of the national scenic spots planning”.

(7) The Urban and Rural Planning Management Center of the former Ministry of Construction disbursed 345,000 yuan of basic expenses out of project expenditures.

In the whole year of 2007, the Urban-Rural Planning Management Center of the former Ministry of Construction disbursed 345,000 yuan on staff salaries, medical expenses, housing accumulation fund, rental subsidies which should fall into the category of basic expenses, from the special fund for “examination and supervision of national scenic spots planning”.

(8) The Department of Audio and Visual Instruction of the Cadres’ Institute of the former Ministry of Construction kept an unauthorized departmental fund with 106,700 yuan.

The Department of Audio and Visual Instruction of the Cadres’ Institute of the former Ministry of Construction, in organizing the 2006 and 2007 “tutorial and training course for the exams on qualifications of grade-1 registered architects”, fraudulently claimed 106,700 yuan of fund through disbursing the cost of organizing the course from the financial department of the institute with false receipts and documents and kept the fund off the books. Of the sum, 55,100 yuan was used for paying teachers’ service charges and travel expenses and 51,600 yuan was divided up among those implicated in the case.

3. Audit Decisions and Recommendations

In compliance with the stipulations of the relevant state laws and regulations, CNAO issued in a timely manner the audit report and audit decisions in regard to the above problems. With regard to the problem that no timely final account was made for completed projects for construction investment in the capital construction projects, the department concerned was requested to submit the final account of completed projects as required by the regulations. For the problem that the Urban and Rural Planning Management Center of the former Ministry of Construction misappropriated research topic fund of project expenditure for paying the expenses of international conference, the center was urged to return the fund to the original channel. Regarding the problems that the revenues and expenditures of international conference were not put under budget management and that the balance of the conference was not turned over to central government finance in whole sum, it was requested that the department concerned strictly manage its budget and that the department concerned should deduct the misappropriated fund by the Urban and Rural Planning Management Center and turn over to central government finance the entire balance after settling accounts with the International Water Association. As for the problem of spending on appraisal work without budget arrangement, it was requested that the relevant fund be returned to the original channel. For the inaccuracy of the final account of the expenditures of research topic projects of the former Ministry of Construction undertaken by five units, it was required the five undertaking units be instructed to report the true figures, adjust the final account of project expenditures and in the future boost the management of final account of project expenditures. Concerning the problem of spending fund without budget arrangement by the Urban and Rural Planning Management Center of the former Ministry of Construction, the center was required to step up budget management and not to expand the scope of budgetary expenditures without authorization. In regard to the disbursement of basic expenses from project expenditures by the above mentioned center, the center was urged to return the fund to the original channel. As to the problem of the unauthorized departmental fund of the Department of Audio-Visual Instruction of the Cadres’ Institute of the former Ministry of Construction, those implicated were asked to return the money they had illegally divided up, the fund should be included in the budget for management and those implicated were criticized through a public circular.

In addition, CNAO sent a separate letter of audit recommendations on other problems of non-standardized management and the Ministry of Housing and Urban-Rural Development already addressed them.

4. Implementation of Audit Decisions and Recommendations

The former Ministry of Construction conducted a self-examination prior to this audit and rectified the problems found in the self examination. The Ministry of Housing and Urban-Rural Development took the audit findings seriously, instructed the relevant units to earnestly correct and rectify the problems in compliance with the audit recommendations. In regard to the problem of no timely final account for completed project of construction investment, the information on the final account was already submitted as required and the final account itself was under the process of examination and approval. With regard to the problem of the Urban and Rural Planning Management Center of the former Ministry of Construction misappropriating topic research fund of project expenditure for paying international conference expenses, the related fund was returned to the original channel as required. As for the problems of revenues and expenditures in convening international conference not being under budget control and the balance of the conference not being turned over in whole sum, contacts were made, as requested, with the International Water Association and, after the settlement of the conference expenses, the balance will be handed in as requested as soon as possible. Regarding the problem of expenditure without budget arrangement of paying for appraisal work, it was urged that the fund be returned to the original channel. For the problem of inaccurate final accounts of project expenditure performed by the five units undertaking research topic projects of the Ministry of Construction, the final accounts of the project expenditure were all readjusted according to facts as required. With regard to the problem of the Urban and Rural Planning Management Center of the former Ministry of Construction spending without budget arrangement, the Ministry of Housing and Urban-Rural Development already requested the related unit to use fund in strict compliance with the scope of the budgetary expenditures in the future. Concerning the Urban and Rural Planning Management Center of the former Ministry of Construction disbursing basic expenses from project expenditures, the fund was returned to the original channel at request. As for the unauthorized departmental fund of the Department of Audio-Visual Instruction of the Cadres’ School of the former Ministry of Construction, the fund, illegally divided up by the implicated personnel, was duly recovered and put under the control of the departmental budget and those implicated in the matter were criticized in a circular.

Moreover, CNAO sent a separate letter of recommendations in regard to other problems of non-standardized management and the Ministry of Housing and Urban-Rural Development have addressed them accordingly.

                   Audit Findings on 2007 Budget Enforcement and Other

                      Financial Revenues and Expenditures of Former

                             Ministry of Communications

In accordance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008 CNAO audited the 2007 budget enforcement and other financial revenues and expenditures of the former Ministry of Communications (now the Ministry of Transport) and conducted a selective audit of six of its affiliated units.

1. Overall Situation

The former Ministry of Communications was a first-level budgetary department of central government finance. Its budget was composed of the budget of the ministry itself and those of 46 secondary budgetary units.

The audit findings indicated that the 2007 budgetary revenues and expenditures of the former Ministry of Communications basically conformed to the stipulations of the state laws and regulations on budget, finance and economics and that its accounting practices basically accorded with the provisions of the Accounting Law of the People’s Republic of China, related accounting standards and systems. The ministry earnestly addressed the problems found in the audits of the previous years, made efforts to formulate rules and regulations and enhance management. However, the audit found some problems which needed to be addressed and improved.

2. Main Audit Findings

(1) 667 million yuan for an affiliated unit was not included for budgetary management.

In 2001, the former Ministry of Communications, without the agreement of the Ministry of Finance, approved by itself the application of “The Account System of Transport (Communications) Enterprises” by a certain affiliated public institution. By the end of December 2007, through applying this account system for enterprises that unit accumulated 667 million yuan of self-owned fund which was not covered by budgetary management. Of the sum, 260 million yuan of investment returns from overseas, 247 million yuan of accrual depreciation of assets and 160 million yuan of accrual staff bonuses in previous years, staff welfare and application of scientific and technological achievements were all on account.

(2) 84 million yuan of special fund of vehicle purchase tax was illegally used for the construction of office building for its affiliated unit.

From 2005 to 2007, the former Ministry of Communications, without the approval of the National Development and Reform Commission and under the circumstances that its affiliated unit Highway Research Institute had office buildings already, used 84 million yuan of special fund of vehicle purchase tax for the construction of office buildings for the institute. In 2005, the institute divided the project of office buildings with 99.96 million yuan of planned investment (of which 84 million yuan being special fund of vehicle purchase tax) into two projects to be approved, respectively housing for comprehensive operations and highway smart transport system engineering research center. For each of the two projects the investment was 49.98 million yuan. The projects were started in 2006 after the approval of the Ministry of Communications and by the time of the audit, the topping of the building were finished.

(3) 5.6048 million yuan of surcharge of water passenger and cargo transport was not handed over in a timely manner.

Till the end of December 2007, the former Ministry of Communications did not hand over 5.6048 million yuan of surcharge of water passenger and cargo transport to the Ministry of Finance.

(4) An affiliated unit of the Shanghai Maritime Bureau kept 8.1468 million yuan of fund off the books.

From 2005 to 2007, a company affiliated to the Shanghai Maritime Bureau did not include 8.1468 million yuan, compensation in the case of oil pollution by a foreign freighter, in its books, but kept it off the books for a long time.

(5) Its affiliated Rescue and Salvage Bureau misappropriated 7.497 million yuan of special fund.

In April 2007, the Rescue and Salvage Bureau, without approval, appropriated 7.497 million yuan of special fund for specific purpose to its affiliate the China Ocean Engineering Co., among which amount 5.497 million yuan was used to supplement the registered capital of the company.

(6) Some affiliated units, without approval, leased out office housing.

From 2000 to 2007, the affiliated Scientific Research Institute, Service Center and Planning Institute of the ministry, without approval, leased out some vacant office housing and obtained a total of 23.6607 million yuan of rent revenue. Of the sum, the Scientific Research Institute leased out 8,000 square meters of housing and received 15.7129 million yuan of rent; the Service Center got 5.3328 million yuan of income; the Planning Institute leased out 3,724 square meters of housing and gained 2.615 million yuan of revenue.

(7) Some affiliated units under-calculated 12.3985 million yuan of revenue.

In 2007, its subordinate the Environmental Protection Center kept 3.8539 million yuan of revenue in previous years on account for a long time. The Service Center of the ministry kept on account for a long time 8.5446 million yuan of property and consultation fees collected in previous years. The above two items resulted in the under-calculation of 12.3985 million yuan of revenue.

(8) Some subordinate units, in violation of the regulations, bought and used shopping cards and spent a total of 751,300 yuan.

In 2007, its affiliates the China Classification Society and China Communications and Telecommunications Center spent 751,300 yuan on Zihexin shopping cards for payment of welfare items for the staff and gifts of units. The sum was disbursed as consultation, service and activities expenses.

3. Audit Decisions and Recommendations

In regard to the above problems, CNAO, in accordance with the provisions of the state laws and regulations, issued the audit report, made audit decisions or sent them to the relevant units in a timely manner. Regarding the problem that fund of a certain affiliated unit of the former Ministry of Communications was not brought under budget management, it was requested that the Ministry of Finance be consulted to further clarify the account system of the unit and include the relevant fund into budget management. For the problem of using the special fund of vehicle purchase tax in contravention of the regulations for the construction of office buildings of an affiliated unit, the department concerned was urged to go through the examination and approval formalities with the National Development and Reform Commission. With regard to the problem of not turning over in a timely manner surcharge of water passenger and cargo transport, it was requested that the fund be handed in to central government finance. For the fund kept off the books by an affiliated company of the Shanghai Maritime Bureau, it was required that the company be urged to bring back the fund and put it under budget management. Concerning the problem that the affiliated Rescue and Salvage Bureau misappropriated special fund, the bureau was requested to return the fund to the original channel. Regarding the leasing out without authorization of office buildings by some affiliated units, it was urged that the situation be checked and the matter be submitted to the Ministry of Finance for approval. In regard to the problem that some affiliated units under-calculated revenues, the related units were required to adjust account. The problem that some subordinate units, in contravention of the regulations, purchased and used shopping cards was referred to the People’s Bank of China for handling.

In view of the audit findings, CNAO suggested that the Ministry of Transport strengthen budget management, ensure the intactness of budget planning, enhance the management of the special fund of communications, ensure the safe and efficient use of fund, boost the supervision of its subordinate units and further standardize financial and accounting revenues and expenditures.

4. Implementation of Audit Decisions and Recommendations

The former Ministry of Communications conducted a self-examination prior to the audit and rectified the problems found in the self-examination. The Ministry of Transport set big store by the problems discovered in this audit, convened a meeting of the top management of the related departments and required all the units to take earnest and effective measures to actively address the problems, further improve the internal management system, set up mechanisms with long-term effect and prevent the recurrence of similar problems. For the problem that fund of a certain affiliated unit of the former Ministry of Communications was not under budget management, the necessary documents for applying for the approval of the Ministry of Finance were being prepared. With regard to the problem of using the special fund of vehicle purchase tax for the construction of office buildings for affiliated unit, which was in violation of the regulations, the application to the National Development and Reform Commission for examination and approval was being submitted. The surcharge of water passenger and cargo transport, which was not turned over in a timely manner, was handed in to central government finance on June 6, 2008. The off-the-book fund of an affiliated company of the Shanghai Maritime Bureau was retrieved and put under budget management on March 10, 2008. The special fund misappropriated by the Rescue and Salvage Bureau was recovered on June 20, 2008. With regard to the leasing out office housing by some affiliated units without approval, the situation was being sorted out and related formalities were being undertaken. The under-calculated revenue of some subordinate units was retrieved respectively in March and June 2008 and the due tax was handed in.

Moreover, CNAO sent a separate letter of audit recommendations in regard to other problems of non-standardized management and the Ministry of Transport has already addressed them accordingly.

                 Audit Findings on 2007 Budget Enforcement and Other

                        Financial Revenues and Expenditures of the

                                Ministry of Railways

In compliance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008 CNAO conducted an audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Railways and carried out a selective audit on its 14 subordinate units.

1.       Overall Situation

The Ministry of Railways is a first-level budgetary department of central government finance. Its budget is composed of budget of the ministry itself and those of 54 secondary budgetary units.

The audit findings show that the 2007 budgetary revenues and expenditures of the Ministry of Railways complied basically with the stipulations of the state budget, financial and economic laws and regulations and its accounting practices basically conformed to the provisions of the Accounting Law of the People’s Republic of China, related accounting standards and accounting systems. The ministry actively pushed forward a comprehensive budget management system and forcefully promoted the elevation of the management level of the various units. It organized the collection and management of the railway construction fund (referred to hereafter as “the fund”), facilitated the investment of various social funds in railway construction, ensured the implementation of the “Medium- and Long-term Railway Network Plan” and achieved good social effect. The ministry also earnestly addressed the problems found in the audits of previous years. However, the audit discovered some problems which need to be corrected and improved.

2.       Main Audit Findings

(1)      The Ministry of Railways itself and some of its subordinate units spent 15.9312 million yuan exceeding the budget in government procurement projects.

In early 2007, the Ministry of Railways itself and nine affiliated units including the Railway Art Troupe applied for and obtained the approval of the Ministry of Finance of budget for 766,500 yuan of government procurement projects. The above departments, without application and approval, adjusted by themselves the budget of government procurement projects to cover the expenses for buying office equipment with the actual spending amounting to 16.6977 million yuan, 15.9312 million yuan more than the budgeted fund.

(2) The Institute of Standard Measurements of the Academy of Railway Sciences (referred to hereafter as “ISM”) collected 14.5336 million yuan of charges in violation of the regulations.

From 2004 to 2007, the State Rail Tank Car Volume Measurement Station, an affiliate of the ISM, without approval, issued a document and collected 30% of the revenue of volume measurement charges from sub-stations of Xi’an and Shenyang (not affiliated to ISM) as administrative charges. The station collected accumulatively 8.9692 million yuan.

From 2005 to 2007, the State Scale Measurement Station of ISM, without approval, set the standard by itself and collected from sub-stations of Beijing and Wuhan (not affiliated to it) comparison charges which accumulatively amounted to 5.5644 million yuan.

The above two charges amounted to a total of 14.5336 million yuan which was handed in to ISM by the sub-stations through their revenue of administrative and public service charges returned by public finance. ISM turned it into revenues from service operations and used it for routine expenses.

(3) The Center of Introduction of Foreign Capital and Technologies of the Ministry of Railways (referred to hereafter as “CIFCT”) did not clear up 363.505 million yuan of project fund.

CIFCT obtained foreign loans from the Ministry of Railways and re-lent them to project-undertaking units such as railway bureaus for the purchase of large railroad maintenance equipment. By the end of 2007, the center should pay back 363.505 million yuan of interest to the Ministry of Railways. It had collected 121.8411 million yuan of interest from the project-undertaking units, but did not turn it over to the ministry. Another 241.6639 million yuan of due interest was not collected. Of the sum, the non-affiliated units such as the China Railway Engineering Co. owed 151.866 million yuan of interest deriving from loan projects before 2001 which was on account.

3.       Audit Decisions and Recommendations

In regard to the above problems, CNAO, in compliance with the provisions of the state laws and regulations, issued the audit report and audit decisions in a timely manner. With regard to the problem of above-budget spending in government procurement projects, the Ministry of Railways was required to manage government procurement projects in strict compliance with the regulations. For the problem of charge collection in violation of the regulations by ISM, the unit was requested to revoke the irrational charges. Concerning the problem of CIFCT not clearing up project fund according to the rules, the center was urged to specifically clear up the fund, pay it back and put it under budget management.

In view of the audit findings, CNAO suggested the Ministry of Railways further strengthen budget management, enhanced the guidance to and examination of budgets formulation by the grass-roots units and ensure the intact and standardized nature of budgets. The various balances of fund should be cleared up in a timely way and overall arrangements be made for them so as to further enhance the efficient use of fund. The ministry should boost the financial management of and law enforcement review on the subordinate units and fulfill the responsibility of financial monitoring and management.

4.       Implementation of Audit Decisions and Recommendations

The Ministry of Railways launched a self-examination prior to the audit and corrected the problems revealed in the self-examination. The ministry took the audit findings seriously, convened numerous meetings to study and arrange their rectification and instructed the relevant units to earnestly rectify and improve. In regard to the problem that government procurement projects made expenses above the budget, the ministry required a review of the 2008 government procurement projects and sent to the Ministry of Finance in May 2008 the “letter on applying for adjusting the government procurement budget of the Ministry of Railways”. At the same time, the ministry issued the Circular on Further Enhancing the Enforcement and Management of Departmental Budgets to further standardize the management of government procurement project budget. As for the collection of charges in violation of the regulations by ISM, ISM stopped the irrational collection of charges in March 2008. Concerning the problem of not clearing up project fund according to the rules by CIFCT, the ministry cleared up the owed fund more vigorously and in May 2008, with the exception of 78.472 million yuan of the interest of small projects of unaffiliated units, all the other fund on account was recovered.

                    Audit Findings on 2007 Budget Enforcement and

                   Other Financial Revenues and Expenditures of the

                           Ministry of Water Resources

In accordance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to February 2008, CNAO audited the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Water Resources and performed a selective audit of 21 of its affiliated units including nine units outside Beijing.

1. Overall Situation

The Ministry of Water Resources is a first-level budgetary department of central government finance. Its budget is composed of the budget of the ministry itself and those of 31 secondary units.

The audit findings indicated that the 2007 financial revenues and expenditures of the Ministry of Water Resources complied basically with the stipulations of the state budget, financial and economic laws and regulations and that its accounting practices conformed to the stipulations of the Accounting Law of the People’s Republic of China, the related accounting standards and systems. The ministry earnestly organized the compilation and submission of the budgets of the ministry, further boosted budget and financial management, set up and improved related systems and conscientiously addressed problems found in the audits of the previous years. However, the audit discovered some problems which needed to be corrected and improved.

2. Main Audit Findings

(1)    123.01 million yuan of budgetary fund was not earmarked for specific units.

a. In 2007 when approving the budgets of its affiliated units, the Ministry of Water Resources did not earmark 116.42 million yuan of capital construction fund for specific units until October and November, which affected the efficient use of the fund.

b. In approving the budget of the Water Resources Information Center, the Ministry of Water Resources did not earmark 6.59 million yuan of project fund directly for the undertaking units including the Bureau of Hydrology of the Yangtze River Water Resources Commission (YRWRC for short).

(2)    Allocation of 1.16 million yuan of public fund to a unit which is financially independent.

The Ministry of Water Resources appropriated 1.16 million yuan of budgetary fund for basic expenditure to the General Water Resources Construction and Management Station, a public institution which is financially independent.

(3) 22.05 million yuan of project fund was transferred to its subordinate unit through commission contract.

The Ministry of Water Resources, in the form of commission contract, transferred 22.05 million yuan of project fund of financial appropriations for “operation management of water resources industry” and other projects from the zero balance account of the ministry to the basic account of its affiliated unit. The practice was not conducive to further specification of the budget and supervision of the use of fund.

(4) The China Institute of Water Resources and Hydropower Research (referred to hereafter as “CIWRHR) misappropriated six million yuan of special financial fund.

CIWRHR misappropriated six million yuan of special financial fund of “operational expenses for basic scientific research of central public-interest institutes of scientific research” and allocated the fund to three companies for purchasing exchange boards and other network supportive equipment, which were to be used in the scientific research bases in Daxing and Yanqing, for making multimedia audio-visual environment control systems. At the end of December 2007, the totality of the above project fund remained in the above three companies.

(5) Some units transferred 11.597 million yuan of financial fund.

a. In 2007, the Information Center, by paying prepaid guarantee fund to cooperative units of the project and taking it back in the same amount later, transferred 4.5086 million yuan of financial budgetary fund from its zero balance account to the basic account. The fund was not returned to the cooperative units until the acceptance of the projects. By the end of December 2007, the balance of the guarantee fund which the center had prepaid and did not return to the cooperative units stood at 5.597 million yuan.

b. CIWRHR paid an affiliated company as its 2008 property management fees six million yuan originally earmarked for “expenses for reform activities of non-profit scientific research institutions”.

(6) Some units spent 4.2919 million yuan outside the designated scope of expenditure.

Four units including the Institute of Water Resources and Hydropower Planning and Design (referred to hereafter as “IWRHPD”) expanded the scope of expenditure and disbursed 4.2919 million yuan for staff salaried from funds for preliminary capital construction of the projects including “risks of dam breaching of reservoirs and study on disaster relief”.

(7) Some units, through disbursing expenses with false receipts, fraudulently claimed 4.7681 million yuan of cash.

a. Seven units including the Pearl River Water Resources Commission (PRWRC) and the Pearl River Water Resources Comprehensive Technical Center of PRWRC fraudulently claimed 2.2141 million yuan of cash through false receipts of conference expenses and used the cash for specialists’ appraisal charges at project appraisal meeting, consultation fees, bonuses and sightseeing expenses. Of the sum, the Water Resources Protection Bureau of the Pearl River Basin (WRPBPRB) claimed by deception 161,700 yuan of cash and put the money in the private savings account of a employee in its supervision and management division. That person used 150,000 yuan of the fund for speculating on the stock market. After the problem was exposed in the audit, that involved person returned the 161,700 yuan to the WRPBPRB financial department.

b. The Water Resources and Hydropower Engineering Technical Research Center of the Huai River Water Resources Commission and its subordinate enterprise fraudulently claimed 2.16 million yuan of cash with false receipts and distributed 1.385 million yuan of the sum to the staff.

c. In May 2006, the Henan River Surveying and Design Consultancy Co. Ltd., affiliated to the Yellow River Water Resources Commission (YRWRC for short) claimed by deception 394,000 yuan of resettlement fund. Of the sum, 291,000 yuan was used for paying staff salaries and 103,000 yuan was deposited in the bank in private name.

(8) A subordinate unit of PRWRC set up a “concealed account” with 482,200 yuan and deposited 3.5797 million yuan of public fund in a private bank account.

a. From 2003 to January 2008, the Jiangmen Base of the Bureau of Hydrology of PRWRC turned its comprehensive building, non-profit state-owned assets, into profit-making assets and gained 482,200 yuan of profit which was kept off the books. Of the sum, 383,200 yuan was used for bonuses, subsidies and hospitality expenses.

b. From June 2006 to the end of 2007, the cashiers of the Bureau of Hydrology and Bureau of Water Source drew accumulatively from the zero balance and basic accounts of their units 2.5649 million yuan of cash and deposited the money into their private bank accounts. All the money was used for the routine expenses of the two bureaus. From December 2005 to January 2008, the cashier of the Surveying Center of PRWRC deposited into private bank account 1.0148 million yuan of special financial fund allocated by the Bureau of Hydrology of PRWRC and used the fund for payment of routine expenses of 1.0141 million yuan.

(9) The three units of the Sea Buckthorn Development and Management Center of the Ministry of Water Resources, PRWRC and YRWRC, without approval, spent above the budgets 385.5361 million yuan.

(10) 167.6484 million yuan of revenues of some units was not brought under budget management.

167.6484 million yuan of parallel project funds collected, sponsorship fund, fund of commission contract of departments and bureaus and pre-collected topic contract fund collected by 11 subordinate budgetary units in Beijing including IWRHPD was not settled as revenues of public service and put under the unified departmental budget management according to the rules.

(11) The Yellow River Water Resources Engineering Transaction Center collected 2.719 million yuan of charges in contravention of the regulations.

The Yellow River Water Resources Engineering Transaction Center affiliated to YRWRC, before setting a benchmark charges by the department in charge, collected, in violation of the regulations, 2.719 million yuan of charges for examination of qualifications for market access from the bidding and tendering units, charges for participation in transactions, information service fees and transaction service fees.

(12) Seven affiliated public service units of the Ministry of Water Resources including the Service Bureau, without authorization, used by themselves state-owned assets worth 477.5372 million yuan in business investment.

(13) 99.8779 million yuan of financial fund of some projects was kept unused.

99.8779 million yuan of financial budgetary fund for 2007, earmarked for 54 projects of 10 units including IWRHPD such as the “archive storehouse of the Taihu Basin Administrative Bureau” and the “Songhua and Liao River Basin Water Environment Monitoring Center” was not used.

(14) Final accounts were not made for some capital construction projects.

Final accounts were not made for 15 completed projects with a total investment of 102.8572 million yuan including “water-saving irrigation scientific research demonstration project” and “purchase of office building” of the Bureau of Hydrology of YRWRC, CIWRHR, the China Irrigation and Drainage Development Center and the Development Research Center of the Ministry of Water Resources.

(15) No public bidding was conducted and there was sub-contracting in contravention of the rules in the construction projects of some units with an investment of 123.2172 million yuan.

a. In the project of the Phase 1 of Nierji Reservoir Wharf of the Songhua and Liao River Water Resources Commission (SLRWRC for short) there was no public bidding. The project worth 2.2958 million yuan was directly assigned to the undertaking unit through signing a contract with it.

b. In 2007, Nenjiang Nierji Water Resources and Hydropower Co. Ltd. of the Songhua and Liao River Water Resources Commission sub-contracted part of the Earthwork Project of Sluices of the Nierji Water Control Project, worth 116.2514 million yuan, signed between the company and the undertaking unit, to consign it to another designated undertaking unit.

c. In December 2005, the construction office of the information development project of the Hai River Water Resources Commission, without public bidding, consigned directly the project of 4.67 million yuan “Decision-making Support System of Phase II of Water Quality Automatic Monitoring System on Upper Reaches of the Guanting and Miyun Reservoirs” to the unit which develops the project.

Moreover, it was found that some units of the Ministry of Water Resources outside Beijing had the problems of budgets formulation for affiliated units, untimely approval of project budgets, using basic reserves without approval, above-budget spending and disbursement of expenditure of purchase of public-use vehicles out of project fund.

3. Audit Decisions and Recommendations

In regard to the above problems, CNAO, in accordance with the provisions of the state laws and regulations, issued the audit report and audit decisions in a timely manner. For the problem of financial fund not being earmarked for specific units, further refining of budget was required. As to allocation of financial fund to unit which was financially independent, it was requested that the Ministry of Finance be consulted to solve the issue of financial support and that financial fund should not be allocated for their basic expenditures. In regard to the problem of transferring part project fund undertaken by departmental budgetl to the basic account of an affiliated unit, it was urged that such problems be sorted out and that the project budget be further refined to prevent financial fund from being drawn into the basic account of an affiliated unit beyond effective supervision and control. Concerning CIWRHR misappropriating special financial fund, the institute was requested to return the fund to the original channel. Regarding the transfer of financial fund by some units, they were required to return the fund to the original channel. As to the problem that some units expanded the scope of project expenditures, they were urged to return the fund to the original channel. As for some units disbursing expenditures with false receipts and fraudulently claiming cash, it was required that the implicated units and personnel be sanctioned and that the deceptively claimed fund balance be handed in to the financial departments of the related units. With regard to the problem that some units illegally set up “concealed accounts” and deposited public fund into private bank accounts, it was urged that the implicated units and people be sanctioned and that the balances of public fund in the “concealed accounts” and deposited in private bank accounts be put back in the financial books of various units for accounting computation. Concerning above-budget expenditures by some units without authorization, it was required that the budgets of the related units were managed more forcefully and that the budgets be strictly enforced. In regard to revenue of some units not being transferred timely to be under budget control, the related units were required to timely sort out out-going and in-coming fund, transfer revenue according to the rules and adjust accountant books. Regarding the collection of charges in violation of the rules by the Yellow River Water Resources Engineering Transaction Center, the center was urged to suspend the collection and go through the relevant formalities for the charge collection. As to some units using state-owned assets without authorization for profit-making investment, the related units were required to step up the supervision and administration of state-owned assets and proceed with the formalities of application for approval. In regard to part of project fund being unused, it was urged to accelerate the implementation of the projects and raise the efficiency of fund use. Regarding the problem that final accounts for completed projects of some units were not made according to the rules, the relevant units were asked to timely sort out and proceed with the review and acceptance of completed projects and the final accounts. Regarding the problems that no public bidding was conducted for construction projects of some units and sub-contractors were designated in contravention of the rules, it was urged to strengthen the supervision of bid invitation and tendering. It was requested that the problems of budget formulation for units outside Beijing and belated examination and approval of budgets be addressed and corrected.

In view of the problems found in the audit, CNAO suggested that the Ministry of Water Resources manage more forcefully the budgets, strictly follow the procedures of budget planning, step up the management of projects, accelerate the construction of projects, follow strictly capital construction procedures and further enhance the management of the budgets and finance of the affiliated units.

4. Implementation of Audit Decisions and Recommendations

The Ministry of Water Resources launched a self-examination prior to the audit and addressed the problems found in the self-examination. The ministry set big store by the problems revealed in this audit and instructed the units to study earnestly, look into their reasons, formulate practical and effective measures and seriously rectify them. At present, the rectification of the problems pointed out in the audit report and audit decisions has been basically completed. With regard to the problems of not earmarking financial budgetary fund for specific units and transferring through commission contract part of project fund into the basic account of a subordinate unit, thorough sorting out was carried out and corrective measures were formulated. For the problem of allocation of financial fund to units which were financially independent, application was filed to the Ministry of Finance and other related departments to solve the issue of their financial support through consultations. As for the problems of CIWRHR misappropriating special financial fund, some units transferring financial fund and some units expanding the scope of project expenditures, the related fund was all recovered and returned to the original channels. Regarding the problems of some units deceptively disbursing expenses with false receipts and claiming cash, some units keeping “concealed accounts” and depositing public fund into private bank accounts, those responsible were sanctioned in compliance with the Party and government discipline and the balances of deceptively claimed cash, in the concealed accounts and the related deposited fund were retrieved to the financial departments of the relevant units and put in their books for accounting. Concerning some units spending above the budgets without approval, revenue not being brought under budget control and using state-owned assets for profit-making investment, the relevant units adjusted account in accordance with the rules and went through the formalities for application and approval. In regard to the problems of some financial fund of project budget being unused and not conducting public bidding or designating against the rules sub-contractors in construction projects by some units, it was requested that the management of budget be stepped up, the implementation of financial fund be accelerated, the relevant units earnestly proceed with rectification and enhance the monitoring of invitation and submission of tenders. The problem of belated final accounts for completed projects was cleared up and that the final accounts were submitted and accepted according to the rules. For the problem that the Yellow River Water Resources Engineering Transaction Center illegally collected charges, the center suspended the collection and proceeded with the relevant formalities for approval of it. As for the problems of planning budgets for units outside Beijing and belated approval of project budgets, the related units corrected and rectified them in a timely manner.

              Audit Findings on 2007 Budget Enforcement and Other

                  Financial Revenues and Expenditures of the

                          Ministry of Agriculture

In compliance with the stipulations of the Audit Law of the People’s Republic of China, from December 2007 to March 2008, CNAO audited the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Agriculture and conducted a selective audit of 16 of its affiliated units including five units outside Beijing.

1. Overall Situation

The Ministry of Agriculture is a first-level budgetary department of central government finance. Its budget is composed of the budget of the ministry itself and those of 51 secondary budgetary units and project-undertaking units.

The audit findings indicated that the financial revenues and expenditures of the Ministry of Agriculture in 2007 complied basically with the provisions of state laws and regulations on budget, finance and economics and that its accounting practices basically conformed to the stipulations of the Accounting Law of the People’s Republic of China, accounting standards and systems. The ministry further enhanced budget and financial management, established and improved relevant systems and earnestly rectified the problems found in the audits of the previous years. However, the audit discovered some problems which called for correction and improvement.

2. Main Audit Findings

(1) 21.006 million yuan of special financial fund was not earmarked for specific enforcing units.

In approving budgets, the Ministry of Agriculture did not earmark 21.006 million yuan of special financial fund of the ministry for the specific enforcing units and in the enforcement of the budget later the fund was allocated to its affiliated secondary and third-level units.

(2) In allocating 22.8 million yuan of project construction fund, the capital construction procedures were not strictly followed.

From 2005 to 2007, the Ministry of Agriculture, under the circumstances that the preliminary design of the project had not been approved, released the investment plan of the project “informatization equipment procurement” and accordingly allocated 22.8 million yuan of fund for it.

(3) The budget of affiliated China Animal Disease Prevention and Control Center was not accurate and the center claimed 598,600 yuan of financial fund more than the amount in the budget.

The actual staff of the China Animal Disease Prevention and Control Center of the Ministry of Agriculture numbered 61. However, the center formulated and applied for the budget of personnel fund of a 90-strong staff, claiming 598,600 yuan more of financial fund.

(4) Some affiliated units expanded the scope of expenditure and over-spent 24.3667 million yuan.

a. The Bohai and Yellow Sea Area Fisheries and Fishing Port Supervision and Administration Bureau of the Ministry of Agriculture (BYSAFFPSA for short), East Sea Area Fisheries and Fishing Port Supervision and Administration Bureau (ESAFFPSAB for short) and the Information Center of the Ministry of Agriculture disbursed 22.3955 million yuan of personnel expenses, public expenses, heating expenses of the staff dormitories out of non-related projects such as “fisheries administration vehicle operational expenses”, “maintenance expenses of fisheries administration vehicles” and “operational expenses of the China Agriculture Information Network”.

b. The East Sea Area Fisheries Administration Bureau and National Animal Husbandry Station spent 1.9712 million yuan of personnel expenses from public fund.

(5) The affiliated Yellow and Bohai Seas Area Fisheries Administration Bureau obtained 1.227 million yuan of revenue from the disposal of state-owned assets. In 2007, the bureau did not manage the fund thus acquired through the two-channel procedure respectively for revenue and expenditure. In 2007, the Yellow and Bohai Seas Area Fisheries Administration Bureau obtained 1.227 million yuan of revenue through the disposal of state-owned assets such as automobiles, fisheries vessels and office buildings. The revenue was not handed in to the special financial account to follow the practice of two-channel management respectively for revenue and expenditure.

(6) Its subordinate Central Agriculture Broadcast and Television School, without going through the formality of application and approval, took 700,000 yuan from its zero balance account to pay for advance expenditure in the basic account.

In early 2007, the Central Agriculture Broadcast and Television School, out of its basic account, advanced 700,000 yuan of expenditure of program making expenses to China Agriculture Film and Television Center. In September that year, the school, without going through the formality of application and approval, consulted with the China Agriculture Film and Television Center and paid the center 700,000 yuan from three projects including the project “agriculture teaching program making and broadcasting” of its zero balance account. The center returned the fund to the basic account of the school for the advanced fund from the basic account earlier in the year.

(7) Some affiliated units, without authorization, spent 13.7025 million yuan above the budget.

Four units including the China Animal Disease Prevention and Control Center and the East Sea Area Fisheries Administration Bureau, without approval, spent 13.7025 million yuan above the budget.

(8) Some affiliated units, without approval, leased out state-owned assets office buildings and obtained 2.3307 million yuan of rental revenue.

The Agricultural Machinery Experiment and Appraisal Station and National Agricultural Technical Popularization and Service Center of the Ministry of Agriculture, without authorization, leased out state-owned assets office buildings and got respectively 830,700 yuan and 1.5 million yuan of rental revenue which were used to supplement personnel expenses.

(9) In the 1.0944 million yuan government procurement project, its subordinate the East Sea Area Fisheries Administration did not abide by the rules.

For the dredging project of the pier of the East Sea Area Fisheries Administration, the administration directly signed the construction contract with the undertaking unit without going through government procurement procedure, with the contract value being at 618,900 yuan. The all-in-one machine, projector, camera, camcorder, air-conditioner and car insurance with sum value of 223,700 yuan were not included in the government procurement budget. For the computers, printers and copy paper it bought through the government procurement project, the administration spent 251,800 yuan more than the figure in the budget.

(10) The year-end balances of projects of financial fund of some units were relatively big.

By the end of 2007, 30 projects such as “state scientific and technological support plan”, “agricultural comprehensive prevention and control of schistosomiasis” of five units including the China Academy of Tropical Agriculture Sciences and China Animal Disease Prevention and Control Center, had 232.4411 million yuan of available fund. 61.5392 million yuan was used with the balance being 170.9019 million yuan which represented 74% of all available fund.

(11) There were no final accounts for the completed projects with a total investment of 10.6132 million yuan.

The comprehensive building of the Institute of Tropical Processing Research of the China Academy of Tropical Agriculture Sciences was a construction project in 2003 with a total investment of 10.6132 million yuan. The project was completed in September 2006. However, at the end of 2007, the final account for the completion of the project was yet to be submitted.

(12)The problems in the Land Reclamation Bureau of Hainan Province and its affiliated units.

a. The affiliated Bayi Farm High School illegally set up a “concealed account” and intercepted accumulatively 25.45 million yuan of revenue. From 2005, the school set up a “concealed account”, intercepted various revenues and part of tuition and other charges collected against the rules, all of which should have been handed in but was deposited into private bank accounts. By the end of 2007, the intercepted revenues amounted accumulatively to 25.45 million yuan (of which 4.57 million yuan was tuition and other charges collected against the rules) with the balance in the account being 1.1 million yuan.

b. The compiled budget was inaccurate and 5.07 million yuan of financial fund was claimed above the approved figure. The financial division of the bureau formulated 2007 annual “housing accumulation fund” budget of 30.15 million yuan for its affiliated public institutions. However, the actual handed-in fund of the authorized staff of these public institutions stood at 25.08 million yuan so that these units claimed 5.07 million yuan more housing accumulation fund than deserved.

c. Fraudulently disbursing 5.51 million yuan of expenditures. From 2006 to 2007, the bureau appropriated 5.51 million yuan to the Land Reclamation High School as school fund and asked the school to transfer the fund into the account of its own assets to “recover” the 5.51 million yuan which the bureau had previously lent the school for capital construction projects.

d. 2.8744 million yuan of personnel expenditures was disbursed out of public fund. In 2007, the Bureau of Institutional Affairs of the bureau disbursed a total of 2.8744 million yuan of personnel expenditures such as subsidy to staff telephone expenses and holiday subsidy out of public fund.

e. The year-end balances of project fund of financial appropriations were relatively big. In 2007, the project fund of appropriations of central government finance for eight grass-roots budgetary units including Hongguang High School and Haikou Middle Professional School stood at 125.1255 million yuan. At the end of the year the balance stood at 58.2382 million yuan, accounting for 47% of the total fund.

3. Audit Decisions and Recommendations

In regard to the above problems, CANO, in compliance with the provisions of the relevant state laws and regulations, issued in a timely manner the audit report and audit decisions. With regard to the problem of no detailed earmarking of financial fund, it was required that the budget be further refined. As for the problem of not strictly following the procedures of capital construction in allocation of fund, the unit was requested to clear up the problem, formulate corrective measures and in the future rigorously abide by the capital construction procedures. Regarding the problems of inaccurate budgets of the affiliated units and claiming more financial fund than the amount approved, it was urged that the over-claimed fund be turned over to central government finance. For the problems of expanding the scope of expenditures of projects of financial fund and disbursing personnel expenditures out of public fund, the Ministry of Agriculture was asked to instruct the related units to strengthen budget management and enforce strictly the budget. Concerning the problem of no two-channel control of the revenue from the disposal of state-owned assets according to the rules, the Ministry of Agriculture was urged to instruct the relevant unit to hand in the fund to the special financial account. Regarding the problem of paying the advance expenditure in the basic account out of the zero balance account without going through the application and approval formalities, the Ministry of Agriculture was requested to instruct the relevant unit to report the matter to the Ministry of Finance. As to the problem of above-budget spending without authorization, it was required that the Ministry of Agriculture instruct the related unit to map out corrective measures and strictly enforce the budget. Concerning the leasing out of state-owned assets without approval, the ministry was requested to supervise more vigorously the state-owned assets of its affiliated units and stringently enforce the relevant state regulations. In regard to the problem of implementing government procurement projects not according to the rules, the Ministry of Agriculture was asked to instruct the related unit to strictly carry out the relevant regulations on government procurement. For big year-end balances of the project fund of financial appropriations, it was requested that the Ministry of Agriculture instruct the related unit to accelerate the progress of the projects and enhance the efficiency of fund use. With regard to the problem that there was no final account for completed project, the ministry was requested to tell the related units to render in a timely manner the final account for the completion of project. For the problems of the Land Reclamation Bureau of Hainan Province, CNAO specially sent a sanction referral advice, requesting the People’s Provincial Government of Hainan to identify a department for urging the Land Reclamation Bureau to address the problems and inform CNAO of the results.

In view of the above problems, CNAO suggested the Ministry of Agriculture further step up financial management, ensure the soundness and effectiveness of the internal control system, standardize the budget planning procedure of the secondary budgetary units and enhance the scientific and intact nature of budget planning. The ministry should further boost the management of projects and strictly observe the stipulations of the state, do a good job in the appraisal and examination of projects, accelerate the progress of projects and give full play to the efficiency of fund use. The ministry should enhance the administration and supervision of its subordinate units, urge them to improve systems and standardize financial management.

4. Implementation of Audit Decisions and Recommendations

Prior to the audit, the Ministry of Agriculture conducted a self-examination and rectified the problems found in the self-examination. The ministry took the audit findings seriously and earnestly corrected and rectified them. At present, corrective measures have been formulated to solve the problem of no adequate earmarking of special financial fund, improve the decision-making mechanism and enhance the accuracy in budget planning. With regard to the violation of capital construction procedures in allocating fund, comprehensive sorting-out was carried out according to the rules and measures were worked out for rectification. For the problem of inaccuracy of the budgets of affiliated units and over-claiming of financial fund, the over-claimed fund was turned over to central government finance in its totality according to the requirement of the audit. The units concerned already drew up measures to rectify the problems of expanding the scope of expenditure of financial projects and payment of personnel expenses out the public fund and they would enforce strictly the approved budget in the future. As to the problem that the two-channel management mechanism was not abided by for the revenue from the disposal of state-owned assets, the relevant fund was handed in to the special financial account in accordance with the requirement of the audit. In regard to the problem of paying advance expenditure of the basic account out of the zero balance account, the matter was reported to the Ministry of Finance by a special document. Concerning the unauthorized above-budget spending, the relevant units already formulated measures to rigorously enforce the budget in the future. As to the problem of leasing out state-owned assets without approval, the related unit submitted to the Ministry of Agriculture an application for permission to lease. Regarding the problem of not carrying out government procurement project in accordance with the rules, the related unit formulated relevant management measures and would strictly implement the relevant provisions on government procurement. In regard to the problem of too big year-end balances of projects of financial appropriations, the related unit set forth measures to accelerate the progress of the projects. As regards to the problems of no final account for completed project, the China Academy of Tropical Agricultural Sciences is speeding up the final account preparation. As to the unauthorized setting up of a “concealed account”, the Land Reclamation Bureau of Hainan Province instructed Bayi Farm High School to address the problem, recover the balance of fund deposited in private bank account or kept privately and discipline the people implicated in the matter. For the problem of fraudulently disbursing expenses for paying back loan in capital construction, the Land Reclamation Bureau took measures to step up the management of budgetary expenditures and would use fund for the stipulated purpose in the budget.

Moreover, CNAO sent a separate letter of audit recommendations on other problems of non-standardized management and the Ministry of Agriculture has addressed them accordingly.

              Audit Findings on 2007 Budget Enforcement and Other

                    Financial Revenues and Expenditures of the

                            Ministry of Commerce

In accordance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008, CNAO performed an audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Commerce, with the emphasis on the enforcement of the expenditure budget, and conducted a selective audit of its two affiliated units.

1. Overall Situation

The Ministry of Commerce is a first-level budgetary department of central government finance. Its budget is composed of that of the ministry itself and those of four secondary budgetary units.

The audit findings showed that in 2007 the budgetary revenues and expenditures of the Ministry of Commerce conformed basically to the provisions of the state laws and regulations on budget, finance and economics and its accounting practices complied basically with the stipulations of the Accounting Law of the People’s Republic of China, related accounting standards and systems. The ministry did a good job in working out its budgets, set up a relatively sound internal control system which was basically followed, and actively addressed the problems found in the audits of previous years. However, the audit discovered some problems which needed to be corrected and improved.

2. Main Audit Findings

(1)    Too big surplus balance of fund.

Some projects of the Ministry of Commerce were progressing slow. In 2007, their balance of fund accumulatively stood at 1.534 billion yuan which did not play an effective role.

(2)    Contract value was adjusted without authorization.

From April to August 2006, a certain company won the bid, at the price of 43.9295 million yuan, for undertaking the construction of a project in a public tendering organized by the Ministry of Commerce and signed the undertaking contract. Later, the department organizing the public bidding, without applying for approval from the ministry leadership and in the excuse of a big discrepancy between the contract value and the estimate of the project, signed with this company a supplementary undertaking contract, increasing the contract value by 13.7562 million yuan (representing 31% of the contract value of the winning tender).

(3)      Changing public-bidding projects into negotiation tendering ones and some projects were entrusted to special enterprises through designation by administrative means.

In 2005, the Ministry of Commerce chose the general contractor enterprise through negotiation tendering for a project which should have gone through public bidding with the price of the winning tender being 11.1413 million yuan.

In February 2006, the Ministry of Commerce, through an internal document, designated a certain company as undertaking unit for supervision on the construction of projects with investment less than 20 million yuan. By the end of 2007, that company undertook the supervision on the construction of 18 projects with a total contract value of 2.9703 million yuan.

(4)      Inadequate examination led to the facts that some unqualified enterprises won the A-grade qualifications for project undertaking and gained profit through this act.

In 2006, among the enterprises that acquired A-grade qualifications for project undertaking which were examined and approved by the Ministry of Commerce, five did not meet the condition that in the two previous years their average annual export-import volume should have reached US$100 million. These five enterprises got 10 project contracts in 2006 with the value of 172.79 million yuan.

(5) The way to ascertain the qualifications of project-undertaking enterprises was not conducive to fair competition.

In 2004, in the measures (on a trial basis) for ascertaining the qualifications of project-undertaking enterprises, the Ministry of Commerce made it a necessary prerequisite that the applicant enterprise must have undertaken overseas projects, which was not conducive to the equal participation of the domestic undertaking enterprises in the competition.

3. Audit Decisions and Recommendations

In regard to the above problems, CNAO issued the audit report and audit decisions in a timely manner in accordance with the provisions of the relevant state laws and regulations. With regard to the problem of too big surplus balances of fund, the Ministry of Commerce was required to push forward more vigorously the implementation of projects. As for the problem of unauthorized adjustment of contract value, the ministry was requested to strengthen management over tenders invitation and submission and contract value, and prevent the behavior against the rules of arbitrary adjusting estimate and increasing contract value. Regarding the problems of changing public-bidding projects to negotiation tendering ones and designating particular enterprises by administrative means for undertaking projects, the Ministry of Commerce was urged to conduct public bidding in strict compliance with the regulations and that it was rigidly forbidden to designate particular enterprises for undertaking projects. For the problem of inadequate checking which led to unqualified enterprises acquiring A-grade qualifications for undertaking project and gaining profit, the ministry was asked to check with the General Administration of Customs the import-export volumes of the above five enterprises, solve the issue according to the rules and, in combination with the 2008 annual examination of qualifications of undertaking enterprises, proceed with a re-examination of their qualifications. With regard to related systems, the ministry was requested to further improve and amend them.

In view of the audit findings, CANO suggested that the Ministry of Commerce enhance the project management system and strengthen internal financial management and supervision.

4. Implementation of Audit Decisions and Recommendations

Prior to the audit, the Ministry of Commerce launched a self-examination and corrected the problems revealed in the self-examination. The ministry set big store by the problems discovered in this audit. The principal leading officials issued instructions and convened special meetings to study the measures to address the problems. With regard to too big surplus balances of fund, measures were being taken to correct the problem. For the problem of unauthorized adjustment of contract value, the ministry, while stepping up the management and strictly checking, further improved the management measures governing major design changes and the formalities of application and approval. Concerning the problems of changing public bidding of projects to negotiation tendering and designation of particular enterprise for undertaking projects through administrative means, the ministry further improved the management regime of negotiation tendering and strictly controlled the scope and quantity of negotiation tendering. As for the problem that due to inadequate checking, unqualified enterprises obtained the A-grade qualifications for project undertaking and gained profit, the ministry sent a letter to the General Administration of Customs to check the data of the five enterprises and would add a re-checking process on the enterprises’ performance with the customs in the future examination of qualifications. The ministry was in the process of addressing the other problems.

Moreover, CNAO sent a separate letter of audit recommendations on other problems of non-standardized management and the ministry addressed them accordingly.

             Audit Findings on 2007 Budget Enforcement and Other

                   Financial Revenues and Expenditures of the

                            Ministry of Culture

In accordance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008, CNAO performed an audit of the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Culture and conducted a selective audit of its seven subordinate units.

1.       Overall Situation

The Ministry of Culture is a first-level budgetary department of central government finance. Its budget is composed of that of the ministry itself and those of 33 secondary budgetary units and project-undertaking units.

The audit findings indicated that in 2007 the budgetary revenues and expenditures of the Ministry of Culture conformed basically to the stipulations of the state laws and regulations on budget, finance and economics and its accounting practices complied with the provisions of the Accounting Law of the People’s Republic of China, related accounting standards and systems. The ministry set up a relatively adequate internal control system which was basically enforced, seriously addressed the problems found in the audits of previous years and followed 100% of the audit decisions. However, the audit discovered some problems which called for rectification and improvement.

2.       Main Audit Findings

(1) 63.4335 million yuan of surplus from the previous year was used, which constituted above-budget spending.

In compiling and submitting its 2007 budget, the Ministry of Culture applied for the use of only 56.7 million yuan of balance of administrative public service from the previous year. However, 120.1335 million yuan of balance of the previous year was actually used, 63.4335 million yuan above the budget figure.

(2) The budget enforcement of some projects was progressing slow, leaving 382.6896 million yuan unused.

By the end of 2007, there was a balance of 382.6896 million yuan in the special fund of 34 projects of cultural undertakings of the ministry itself. Of the sum, the budget enforcement ratio of 11 projects including the state focal protection of Peking Opera institutes and troupes was less than 50%, with their balance amounting to 57% of the balance of special fund.

(3) Misappropriation of three million yuan of special fund.

In 2007, the ministry used three million yuan of special fund earmarked for “meeting expenses of the Ministry of Culture” for payment of staff medical expenses.

(4) The ministry and its affiliated units expanded the scope of expenditure of special fund and spent 14.6104 million yuan.

a. In 2007, the ministry disbursed one million yuan of allowances and subsidies, which should have been paid by self-raised fund, out of the special fund of “departmental contingent fund”.

b. In 2007, its affiliate the Market Development Center disbursed 3.3374 million yuan of expenses of housing rent and logistics service from the special fund earmarked for “construction of monitoring platform of computers of national network cultural market”.

c. In 2007, its affiliated National Library disbursed 10.273 million yuan of basic expenses from the special fund for “microfilm special project” and “digitization of library documentation and construction project of database of digital resources”.

(5) In 2007, its affiliated National Library kept 12.8587 million yuan of balance in the current account for a long time.

By the end of 2007, the National Library kept under the title of “payable fund” 4.1038 million yuan of balance taken in previous years from talent development fund and comprehensive administrative charges. Under the title “other payable fund” was kept for a long time the year-end accumulated 3.2355 million yuan of balance from the returned salaries of its subordinate company. And 5.5194 million yuan of balances of authors’ remuneration and dollar settlement of exchange was kept under the title “payable fund”, without timely clearing up.

3. Audit Decisions and Recommendations

In regard to the above problems, CNAO issued the audit report and audit decisions in a timely manner in compliance with the provisions of state laws and regulations. In regard to above-budget using the surplus of the previous year, it was required that the balance of the previous year be used for expenditures of this year and incorporated in budget for unified use. As for fund being unused due to slow progress in budget enforcement, it was requested that effective measures be taken to speed up budget enforcement and enhance the efficiency of fund use. For the problems of misappropriation of special fund and expanding the scope of expenditure of special fund, account adjustment was requested to return the fund to the original channel. Concerning the balance of fund being kept for a long time in the current account by the National Library, the unit was urged to clear up all out-going and in-coming fund, adjust related account and bring the fund under the unified budget management.

In view of the discovered problems in the audit, CNAO suggested that the Ministry of Culture further enhance its management of special funds, raise the efficiency in the use of financial fund, compile and submit budgets in an intact manner, clear up balance of fund and make financial fund play a bigger role.

4.  Implementation of Audit Decisions and Recommendations

Prior to the audit, the Ministry of Culture conducted a self-examination and corrected the problems found in the self-examination. The ministry took the audit findings seriously and instructed the related units to earnestly rectify and address them, and initiated a training course for the financial staff of its subordinate units and gave targeted training to the leading staff in charge of financial affairs and financial staff of various units. By the end of June 2008, the rectification of the problems revealed in the audit report had basically been completed. With regard to the problem of above-budget using balance of the previous year, in arranging  2009 budgets preparation, various departments, bureaus and affiliated units were explicitly required to rationally estimate the amounts of the balance of the previous year which would be used and show them in the 2009 budgets to ensure the accuracy and intactness of the departmental budgets. The following measures were taken to accelerate projects implementation to address the problem of fund being unused because of slow budget enforcement in some projects. One was to add procedures of submission, examination and approval of budget and ask various departments and bureaus, after approving the budgets, to draw up budget enforcement plans and implement the projects according to the plan and in steps. Two was to issue relevant circular and set forth explicit request for various departments to accelerate budget enforcement. Three was to emphatically urge and supervise the projects with big surplus balances of fund. Concerning the misappropriation of special financial fund, the account was adjusted and the misappropriated fund was recovered. At the same time, to ensure the disbursement of medical expenses of retired personnel and working staff, the situation was actively reported to the relevant department and efforts were made to solve the issue appropriately. As to the expanding of the scope of expenditure of special fund and spending, consultations were held with the Ministry of Finance to solve the issue of fund source for allowances and subsidies of public institutions at an early date. The affiliated units- the Market Development Center and the National Library adjusted relevant accounts and returned the related fund. For the balance of fund kept for a long time in the current account, the National Library seriously sorted out the problem and put the balance of fund after the sorting out under the unified departmental budget control.

Moreover, CNAO sent a separate letter of audit recommendations on other problems of non-standardized management and the ministry rectified them accordingly. 

              Audit Findings on 2007 Budget Enforcement and Other

                    Financial Revenues and Expenditures of the

                             Ministry of Health

In accordance with the provisions of the Audit Law of the People’s Republic of China, from December 2007 to March 2008, CNAO audited the 2007 budget enforcement and other financial revenues and expenditures of the Ministry of Health and performed a selective audit of its seven subordinate units.

1.       Overall Situation

The Ministry of Health is a first-level budgetary department of central government finance. Its budget is composed of that of the ministry itself and those of 57 secondary and 29 third- level budgetary units.

The audit findings showed that the 2007 budgetary revenues and expenditures of the Ministry of Health conformed basically to the stipulations of the state laws and regulations on budget, finance and economics and that its accounting practices complied with the provisions of the Accounting Law of the People’s Republic of China, the related accounting standards and  systems. The ministry earnestly did a good job in organizing the compilation and submission of its budgets, formulated management measures including those aimed at strengthening the management of surplus fund of financial appropriations, further enhanced budget and financial management, gradually improved the internal control systems and constantly improved financial supervision and checking. The ministry conscientiously addressed the problems discovered in the audits of previous years and carried out 100% of the audit decisions. However, the audit revealed some problems that called for rectification and improvement.

2.       Main Audit Findings

(1)    For 45.09 million yuan of project fund,the project budget was not adequately refined to specify the undertaking unit..

In compiling and submitting the 2007 departmental budget, the Ministry of Health did not specify the undertaking units of three projects, whose budgets amounted to 45.09 million yuan, including “the investigation and handling of major health care cases” and “comprehensive enforcement and supervision of hygiene regulations”.

(2)      The project budget submitted by the China Disease Prevention and Control Center, an affiliate of the ministry, was not standardized, leading to 144 million yuan surplus balance of project fund.

In making the 2007 budget of phase 1 of the construction project, with a big surplus balance of fund from the previous year, the center applied for and acquired 68.23 million yuan of project budgetary fund for the year. The whole sum became a balance at the end of the year. From 2006 to 2007, the center and its affiliate unit, with the project not yet completed, applied once more and acquired 119 million yuan of special fund “moving to and the inauguration of new venue”, which should have been applied for after the completion of the project. At the end of 2007, the balance stood at 76.3365 million yuan. At the end of 2007 the balance of the above project accumulated to 144 million yuan.

(3) The Institute of Basic Research of the China Academy of Medical Sciences and the Institute of Health Education of the China Disease Prevention and Control Center, both affiliated units of the ministry, adjusted the project budget by 3.7 million yuan.

In 2007, the Institute of Basic Research of the China Academy of Medical Sciences and the Institute of Health Education of the China Disease Prevention and Control Center, without approval, respectively drew out from their budgets 2.2 million yuan and 1.5 million yuan of special fund which were earmarked respectively for “construction of innovation platform for biological medicine and life science” and “upgrading and remodeling of manufacturing equipment of audio-visual medium materials”. The fund mainly was used for setting up the “talent fund” aimed at introducing talent from overseas and for the purchase of high-definition camcorder and office furniture of an affiliated enterprise.

(4) The affiliated unit Talent Exchange Service Center expanded the scope of expenditure of special fund and paid 2.7013 million yuan more of service charges.

From 2003 to 2007, the center did not abide by the provision of service contract on “payment of service charges per the person-times in the participation in the exams of technical qualifications of hygiene expertise”, expanded the scope of special fund expenditure and paid the contracted unit 2.7013 million yuan of technical service charges for those who missed the exams.

(5) The affiliated National Medical Sciences Examination Center, without approval, collected 1.2168 million yuan of miscellaneous cost in the practical skills exams.

From 2005 to 2007, the center, without the approval of the National Development and Reform Commission and the Ministry of Finance, collected, one yuan per person, 1.2168 million yuan of miscellaneous cost in the state practical medical skills exams to make up for its expenses.

(6) 638,300 yuan of conference revenues and expenditures of the affiliated China Preventive Medicine Society was not included in its books for accounting.

In 2006, the society did not include 638,300 yuan of conference revenues in its financial department for accounting, but used it directly for paying conference expenses.

3. Audit Decisions and Recommendations

In regard to the above problems, CNAO issued in a timely manner the audit report and audit decisions in accordance with the provisions of the state laws and regulations. With regard to the problem of project budget not being adequately refined to indicate the specific undertaking unit, the Ministry of Health was required to indicate the specific undertaking units in the project budget according to the rules in the future. As for the affiliated China Disease Prevention and Control Center’s non-standardized submission of budget, which led to surplus balance of the project fund, the center was requested to standardize the submission of project budget according to the rules in the future. As for the problem of the Institute of Basic Research of the China Academy of Medical Sciences and the Institute of Health Education of the China Disease Prevention and Control Center adjusting project budgets without approval, the related units were required to adjust account according to the rules and recover the relevant financial fund. Regarding the problem of the affiliated Talent Exchange Service Center expanding the scope of expenditure of special fund and over-paying service charges, the center was urged to recover the over-paid financial fund. As to the problem of the affiliated National Medical Examination Center, without approval, collecting miscellaneous cost in practical skills exams, the center was requested to suspend the collection of above charges and consult the relevant department to standardize charge collection in medical exams. With regard to the problem of affiliated China Preventive Medical Sciences Society not putting conference revenues and expenditures in its books for accounting computation, the society was required to strictly implement the relevant regulations in the future.

In view of the above problems found in the audit, CNAO suggested that the Ministry of Health further refine the budget of project expenditures and speed up the progress of budget enforcement.  

4.       Implementation of Audit Decisions and Recommendations

Prior to this audit, the Ministry of Health made its self-examination and corrected the problems found in the course of this examination. Serious attention was given to the audit findings. It instructed the units concerned to correct and solve them in earnest and called special subject meetings of the relevant units for studying how to implement audit recommendations. Regarding the problem that its project budget failed to be specified to the execution units concerned, it specified its project budget to the special execution units in the course of 2008 budget preparation. Regarding the problem that the abnormal project budget the Chinese Disease Prevention-Control Center applied for caused the surplus balance of project funds, this center has taken steps to speed up progress of its project and will regulate its project application. Regarding the problem that both the Institute for Basic Studies of the Chinese Medicine Academy and the Institute for Health Education of the Chinese Disease Prevention-Control Center under the ministry readjusted their project budget without approval, the units concerned have readjusted their accounts according to the requirements and recovered the corresponding funds. Regarding the problem that Personnel Exchange and Service Center under the ministry paid extra service fees by enlarging the expenditure scope of its separate item funds, this center reached agreement through consultation with the company concerned that it would deduct the service fees overpaid in the previous years out of those fees it would pay in 2008. Regarding the problem that it collected fees for practical trade tests without approval, the Medicine Examination Center has suspended collection of fees of this kind and studied in conjunction with units concerned ways to regulate collection of fees for nationwide medicine examinations. Regarding the problem that the Chinese Preventive Medical Association failed to bring income and expenditure of expenses for holding meetings into its own accounts, the ministry has instructed this association to strictly enforce the financial system and                          relevant stipulations.

In addition, the CNAO has issued another letter of audit recommendations about other problems of non-standard management found in the course of audit and the Ministry of Health corrected and solved these problems accordingly. 

                   Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

National Population and Family Planning Commission

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the State Family Planning Commission’s budget execution and other financial revenue and expenditure in 2007 and sampling-audited three units under the commission.

1.       Overall Situation

As a first-level budgetary unit of central finance, the departmental budget of the State Family Planning Commission consists of the budget of its own, 11 second-grade budgetary units and project-execution units. 

The audit findings show that the commission’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations of the state’s related budget and financial statutes, that accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, relevant accounting norms and systems and that the commission did in earnest a good job of organizing compilation and report of its departmental budget so as to strengthen its budgetary and financial supervision and improve its level of budgetary supervision. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings

(1) RMB 25.5434 million yuan was appropriated as financial funds of separate items.

In 2007, according to the plans made by its business departments, the State Family Planning Commission appropriated RMB 25.5434 million yuan of financial funds for 13 projects to the units concerned and other units that have business contacts with it and this sum was directly drawn under the heading of “commissioned business expenses” in its account book.

(2) RMB 28.8408 million yuan of other funds that should be collected have long been on credit and was not wound up in time.

By the end of 2007, the commission failed to wind up promptly the funds of RMB 28.8408 million yuan for contraceptive medicines and instruments it ought to collect, and the sum has been on credit for over 10 years.

(3) The Chinese Population Welfare Foundation diverted RMB 5.1909 million yuan of financial funds for a separate item.

 

From 2006 to 2007, this foundation diverted RMB 5.1909 million yuan of the funds for the project “action to subsidize the poorest one-child rural families whose parents are under 60” (RMB 2.547 million yuan was diverted in 2007) as working funds for the project “happiness project—action for aiding poor mothers” mainly executed in Xinjiang, Guizhou, Yunnan, Guangxi and Shaanxi.

(4) RMB 44.1728 million yuan as the balance of funds for purchasing contraceptive medicines and instruments is still kept by the enterprises producing contraceptive medicines and instruments.

Aside from keeping the balance of RMB 37.0235 million yuan in the aforesaid enterprises at the beginning of 2007, the center for developing contraceptive medicines and instruments again appropriated to these enterprises RMB 22.9950 million yuan for the same purpose and in fact the funds spent for this purpose has totaled RMB 15.8457 million yuan. By the end of 2007, the balance kept in the enterprises totaled RMB 44.1728 million yuan, an increase of 7.1493 million yuan from the start of 2007.

(5) The aforesaid center has collected RMB 540.000 yuan that has not been brought into its budgetary supervision.

In 2007, the center collected RMB 130.000 yuan of check and test proceeds and 410.000 yuan of rents, totaling RMB 540.000 yuan, which has not been brought into its budgetary supervision.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO, according to the stipulations prescribed in the state laws and statutes, has written its audit report and issued its audit decision without delay. Regarding the problem of 1-II, it calls for strengthening supervision and examination and assessing project expenditure in strict accordance with the state regulations. Regarding the problem of 2-II, it calls for taking effective steps, trying hard to wind up and recall as early as possible the funds paid temporarily so as to prevent loss and waste of financial funds.

Regarding the problem of 3-II, it calls on the Chinese Population Welfare Foundation to return its diverted financial funds of separate items to their original channels, supervise and make use of them according to the purpose set for them. Regarding the problem of 4—II, it calls on the center to take effective steps for winding up the balance of funds concerned so as to ensure security and effective use of financial funds. Regarding the problem of 5—II, it calls on the center to strictly enforce institutions’ regulations on financial supervision so as to bring all its income into uniform budgetary supervision.

4.       Implementation of Audit Findings

        

Prior to this audit, the State Family Planning Commission made its self-examination and corrected the problems found in the course of this check. It has attached great importance to the problems found in the course of the audit. During the audit, it often listened to audit briefings and called on the units concerned to work out steps and implement them one after another in order to correct and solve the major problems found in the course of audit. At present, it is supervising and checking the use of financial funds of a separate item referred to in 1-II, has taken steps to straighten out the problems referred to in 2-II, called on the unit concerned to take steps to recover the diverted funds referred to in 3-II, and urged the unit concerned to strengthen supervision of the funds referred to in 4-II and bring all the income and expenditure into the unit’s budgetary supervision.

In addition, the CNAO has issued another letter of audit suggestions about other problems related to unregulated supervision found in the course of audit and the State Family Planning Commission corrected and solved these problems.

Audit Findings on 2007 Financial Revenues and

Expenditures of the People’s Bank of China

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to January 2008 the annual financial revenue and expenditure in 2007 of the People’s Bank of China (shortened hereafter as the People’s Bank) and sampling--audited 13 enterprises and institutions directly under the bank and its 15 branches.

1.       Overall Situation

As a first-level budgetary unit of central finance, the People’s Bank’s departmental budget consists of the budget of its own, Shanghai headquarters, its nine branches (including the joint office of Shanghai branch and Shanghai headquarters), its two business management departments, 20 central branches of provincial capitals and five central branches of sub-provincial cities. An independent system of budgetary supervision is practiced in the People’s Bank, which means that after getting the Finance Ministry’s approval for all its financial revenue and expenditure, the bank’s net revenue and expenditure is brought into the budget of central finance.

The audit findings show that the bank’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems and that it has improved its budget and financial supervision. However, some problems that need correcting and solving have been found in the course of audit.

2.       Main Audit Findings

(1) RMB 36.0692 million yuan were given to staff members beyond the set limits.

In 2007, 13 branches of the People’s Bank gave their staff members RMB 36.0692 million yuan--funds misappropriated from their public and administration funds. For instance, its Hefei central branch misappropriated RMB 5.8405 million yuan under the heading of “traveling expenses” to subsidize the bonuses to its staff member in 2007.

(2) RMB 64.8971 million yuan is the revenue and expenditure miscalculated by some units under the bank.

In 2007 and the previous year, the revenue and expenditure miscalculated by the bank’s eight branches and eight enterprises and institutions directly affiliated to it totaled RMB 64.8971 million yuan. For instance, its Shenzhen central branch drew funds on credit, totaling RMB 4.4895 million yuan, as administration expenses for large-scale repair that did not happen and purchasing electronic equipment at the end of 2007.

(3) Some units under the bank deposited RMB 14.5879 million yuan in bootleg’s account

In 2007,the bank’s two branches and two enterprise and institution directly affiliated to it deposited RMB 14.5879 million yuan in bootleg’s account For instance, with the help of its technological association, Beijing money-printing plant of China’s General Corporation for money printing and coin making collected technical service fees of RMB 5 million yuan from its subordinated company and used them as subsidies to its workers in 2007. The aforesaid income and expenditure as well as the remaining sum could not be found in the plant’s financial account.

In addition, problems such as running business in defiance of regulations and abnormal supervision of overseas investment and fixed assets can be still found in some of the bank’s branches, enterprises and institutions directly affiliated to it.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1—II, it calls for finding a legitimate channel to draw expenses for staff members concerned by consulting relevant departments. Regarding the problem of 2—II, it calls for ordering the units concerned to readjust their accounts. Regarding the problem of 3-II, it calls for ordering the units concerned to readjust their accounts and bring the funds deposited off account into their accounts. Regarding the problems such as running business in defiance of regulations and abnormal supervision of overseas investment and fixed assets, it calls for strengthen supervision and correct the problems strictly in accordance with regulations.

The administration has made the following suggestions about the aforesaid problems that the People’s Bank should wind up in earnest the subsidy projects of its branches in defiance of regulations, regulate the source and channel of funds for normal subsidies, strengthen accounting supervision and ensure the authenticity and regularity of financial revenue and expenditure audited. It also suggested that the bank should supervise enterprises and institutions under it to perfect their internal rules and systems and run business according to laws and regulations.

4.       Implementation of Recommendations

The People’s Bank has attached great importance to the problems found in the course of this audit, and called meetings on special subjects to study and plan the work of correcting and solving these problems. It has earnestly straightened up the problem of 1-II and exchanged ideas with the Ministry of Finance and other units concerned. Regarding the problem of 2-II, the branches concerned, enterprises and institutions directly under the bank have readjusted their accounts. Regarding the problem of 3-II, the units concerned have brought their funds off account into supervision of their accounts. Regarding the problems such as running business in defiance of regulations and abnormal supervision of overseas investment and fixed assets, the bank has drawn up regulations such as Suggestions on Strengthening Current Financial Supervision of the People’s Bank and carried out an all-round examination of how all its institutions have been enforcing accounting financial regulations and systems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Commission of State-owned Assets Supervision and

Administration of the State Council

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 budget execution and other financial revenue and expenditure in 2007 of the State-owned Assets Supervision and Administration Commission of the State Council (shortened thereafter as the State-owned Assets Commission) and sampling--audited seven units affiliated to the commission.

1.         Overall Situations

As a first-level budgetary unit of central finance, the State-owned Assets Commission departmental budget consists of the budget of its own, 42 second-grade budgetary units and 126 third-grade budgetary units.

The audit findings show that the commission’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, relevant accounting norms and systems, that the commission has done a good job in organizing compilation and report of its departmental budget, improved its budgetary and financial supervision, formed and perfected relevant systems and corrected and solved in earnest the problems found in the course of  the previous-year audit. However, some problems that need correcting and solving have been found in the course of this audit.

2.  Main Audit Findings

(1) Overstepping the set limits, RMB 955.200 yuan was spent as subsidies in defiance of regulations.

In 2007, the commission’s supervisory committee in charge of important large state-owned enterprises gave the accountants temporarily hired from accountant firms RMB 955.200 yuan as subsidies to their supervisory work and traveling expenses.

(2) Incomplete is the commission’s compilation and report of its departmental budget and RMB 161.2310 million yuan is the entire or partial funds of its 34 institutions that should be brought into its departmental budget actually was not.

In 2007, the entire or partial funds of its 34 institutions such as the service center of its machinery organizations and that of rural trucks affiliated to the Chinese Machinery Corporation which should be brought into the commission’s departmental budget actually was not, and the funds that was not brought into supervision totaled RMB 161.2310 million yuan, of which RMB 135.9989 million yuan is the entire funds of 24 institutions and RMB 25.2321 million yuan the partial funds of 10 institutions.

(3) Major problems were found in the research institute for industrial planning of China’s building materials.

a.         In June 2006, this institute applied to the Chinese Federation of Building Materials for undertaking “the project of renovating office buildings”, which was approved by the latter. The project involved renovation of both the Xizhimen office building and office building in Chaoyang District and renovation project of the Chaoyang office building meant a false application as RMB 1.9846 million yuan of this project’s entire budget was actually invested with the central budget. 

b.         In December 2007, the institute paid the renovation unit RMB 630.800 yuan of the aforesaid project funds from the zero-sum account and at the same time asked the latter to return the aforesaid funds to its basic account so as to transfer this project funds from the zero-sum account to its basic account.

c.         The budget in 2007 compiled and applied for by this institute is false: RMB 13.3163 million yuan being the budgetary revenue, RMB 15.6883 million yuan the budgetary expenditure and RMB 2.3720 million yuan the compensation for the imbalance between income and expenditure of institutional funds--however, the actual imbalance mentioned above at the end of 2006 was RMB 900.100 yuan.

(4) RMB 3.7920 million yuan is the funds for construction projects embezzled by the service center for light-industrial organizations under the commission.

From 2006 to 2007, the State Development and Reform Commission (shortened thereafter as the development and reform commission) made its written reply to the investment plan for the project “supervision, irrigation and slope-consolidation of the Ming Tombs afforestation base” submitted by the center. Of RMB 6.80 million yuan as the project total investment, RMB 6.60 million yuan is the investment from central budget. In the process of implementing this project, the center changed the project’s content without authorization by diverting RMB 3.7920 million yuan of funds for the project construction to projects off budget such as transforming infrastructure of an afforestation base and roads for forest fire control as well as building green landscape.

(5) RMB 1.9308 million yuan is the funds beyond the limits of budgetary estimates invested by the Chinese Enterprise Federation

In 2007, the development and reform commission made its written reply to the investment plan for the project “transforming drainage and heating systems” submitted by the federation, whose investment totals RMB 4.55 million —all from the central budget. In the course of tender-inviting, the federation added some contents for this project, so the contract price for winning the tender was RMB 6.4808 million yuan— meaning RMB 1.9308 million yuan more than budgetary estimates for the total investment of the approved project.

3.  Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for suspension of providing subsidies to more employees than stipulated. Regarding the problem of 2-II, it calls for bringing all the funds of 34 units into the commission’s departmental budget. Regarding the problem of a-3-II, it calls on the state-owned assets commission to deal with it according to regulations and have the persons concerned held responsible. Regarding the problem of b-3-II, it calls on the commission to have the persons concerned held responsible. Regarding the problem of c-3-II, it calls on the commission to instruct the institute concerned to compile its budget based on facts. Regarding the problem of 4-II, it calls for returning the diverted funds to their original channel, readjusting the accounts concerned and have the persons concerned held responsible. Regarding the problem of 5-II, it calls on the federation to correct it and have the persons concerned held responsible.

The administration has made the following suggestions about the problems found in the course of audit that the state-owned assets commission should strengthen                                                                                                            its budgetary supervision and compile its departmental budget on the principle of integrity, that it should improve its examination of feasibility reports on undertaking projects of infrastructure construction and administrative institutions, strengthen its supervision of the funds made use of by its professional departments and units affiliated to it and raise the efficiency for making use of financial funds.

4. Implementation of Recommendations 

Prior to this audit, the state-owned assets commission made its self-examination and corrected the problems found in the course of this examination. It has attached great importance to the problems found in the course of the audit and specially called a working conference of its directors, calling for correcting and solving in earnest these problems, improving and perfecting system establishment. Regarding the problem of 1-II, it has suspended providing subsides to more employees than stipulated. Regarding the problem of 2-II, it will correct it when compiling its departmental budget for 2009. Regarding the problems of a,b-3-II, it is studying how to punish those who responsible for them. Regarding the problem of c-3-II, it has made clear that compilation and report of deficit budget will be abandoned. Regarding the problem of the problem of 4-II, the center has returned the embezzled construction funds to its original channel,  readjusted the accounts concerned and is rendering disciplinary punishment to the persons who are responsible for it. Regarding the problem of 5-II, the federation has submitted another investment plan for the transformed projects exceeding its budgetary estimates and is rendering disciplinary punishment to the persons who are responsible for it.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the commission corrected and solved these problems according to the aforesaid suggestions.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

State Administration of Taxation

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the State Taxation Administration (shortened thereafter as taxation administration)’s budget execution and other financial revenue and expenditure in 2007 and sampling-audited five units under it.

1.       Overall Situation

As a first-level budgetary unit of central finance, the taxation administration’s departmental budget consists of the budget of its own and 40 second-grade budgetary units.

The audit findings show that the taxation administration’s supervision of its budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the administration has drawn up and amended systems of internal control such as Post Duties and Work Procedures for Financial Supervision of the Taxation Administration’s Organizations, and Standards for the Administration’s Training Expenses so as to gradually improve its financial supervision work, and that it is able to enforce the audit decisions and audit suggestions of previous years. However, some problems that need correcting and solving have been found in the course of audit.

2.       Main Audit Findings 

(1) The taxation administration got for its three subordinated institutions that are responsible for their own profits and losses RMB 29.8281 million yuan for their basic expenditure budget by enlarging the scope of its budgetary expenditure while compiling and reporting its departmental budgetary expenditure. 

In 2007, the taxation administration got for its three subordinated institutions such as the education center that are responsible for their own profits and losses RMB 29.8281 million yuan of budgetary funds for the latter’s personnel funds by enlarging the scope of its budgetary expenditure while compiling and reporting its departmental budget for basic expenditure.

(2) The administration undertook the project of building its new office building without approval and therefore let budgetary funds of RMB 298 million yuan leave unused.

By the end of 2007, the Ministry of Finance made a written reply to and appropriated to the administration RMB 300 million yuan of budgetary funds for the construction project of its new office building which was yet to be approved. The administration spent RMB 1.294 million yuan as the project’s preliminary expenses and RMB 16 million yuan as expenses for relocation of the taxation bureau of Badong County in Hubei Province by readjusting the budget of its project. Due to the fact that the aforesaid project was yet to be approved up to the auditing period and would be affected by demolishing and transforming the old office building, it would be difficult to build the new office building on the original construction site and a new one was yet to be determined. Therefore RMB 298 million yuan of financial funds was left unused.

(3) RMB 848 million yuan--the expenditure of vehicle purchasing tax collection and supervision organizations was not compiled and reported in the administration’s departmental budget.

According to the requirements of reforming the tax and fees for purchasing vehicles, the working staff engaged in this work and the work as well in all the provinces should be taken over by the administration system before 31 December 2004, so the relevant assets and funds should be transferred later to the administration. In 2007, the administration failed to compile RMB 848 million yuan—the expenditure budget of vehicle purchasing tax collection and supervision organizations into its departmental budget and later added the aforesaid sum to its budget, thus causing incomplete compilation and report of its departmental budget.

(4) RMB 3.1748 million yuan is the funds spent in bootleg’s account .

By the end of 2007, RMB 2.5988 million yuan was the funds drawn based not on facts spent by the taxation administration for publishing Yearbook of China’s Taxation and Bulletin of China’s Taxation in the previous year and the aforesaid funds was drawn on credit from its publishing house’s funds. RMB 576.000 yuan was the funds falsely listed as expenses for holding meetings by the administration’s nine departments such as tax circulation department, which was drawn on credit from the funds of Jinsanhuan Hotel affiliated to the administration, was actually spent by the aforesaid 9 departments.

(5) RMB 178.0434 million yuan is the expenses either exceeding the administration’s budget or not listed in it.

In 2007, the administration spent RMB 172.4806 million yuan in total for its basic expenditure exceeding its budgetary expenditure, RMB 2.9259 million yuan for its administration expenditure not listed in its budgetary expenditure such as project funds for improving water quality of its staff living quarters, RMB 400.000 yuan diverted from special funds for case-handling for holding the function to review and summarize “10 years of China’s taxation check” and RMB 2.2369 million yuan as budgetary funds appropriated to its subordinated enterprises such as Jinsanhuan Hotel.

 

(6) RMB 1.6844 million yuan is the funds deposited and transferred without permission by the equipment technology division of the administration’s service center

From the start of 2005 to the end of February, 2008, the aforesaid division drew from the financial account of the service center without permission cash funds totaling RMB 1.6402 million yuan and individual donations of RMB 44.200 yuan in the name of paying overtime wage and rent, of which   RMB 1.5074 million yuan was used for granting various subsides and holding functions and RMB 177.000 yuan was left as the balance.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls on the taxation administration to compile and report its budget within its limits. Regarding the problem of 2-II, it calls on the taxation administration to bring the balance into the budgetary arrangement for next year. Regarding the problem of 3-II, it calls on this administration to consult the Ministry of Finance and Ministry of Communications about how to implement measures for reform and make compilation and report of its budget complete. Regarding the problem of 4-II, it calls on the administration to recover the publication funds so as to bring them into budgetary supervision, and hand over to the central financial organ the falsely-listed expenses for holding meetings. Regarding the problem of 5-II, it calls on the administration to recover its appropriations to Jinsanhuan Hotel and other enterprises so as to bring them into budgetary supervision and strictly execute its budget in the time to come. Regarding the problem of 6-II, it calls for bringing the balance of the aforesaid funds into uniform supervision of the center’s financial account.

The CNAO has made the following suggestions about the problems found in the course of audit that the taxation administration should regulate the basic work of budget compilation and report according to rules, compile and report its complete departmental budget based on facts, attach importance to its financial and assets supervision work and further regulate the basic supervisory work according to rules.

4.       Implementation of Recommendations

The taxation administration and its subordinate units concerned have attached great importance to the problems found in the course of audit. The administration leadership gave the departments concerned a special instruction to enforce in earnest the audit decision, hold meetings to study and plan their work and take practical and feasible steps to correct and solve these problems. Regarding the problem of 1-II, the administration has made it clear that it will compile and report its budget according to the establishment of organs prescribed in its new plan of “three decisions” . Regarding the problem of 2-II, it specially issued Notice on Readjusting Funds for Capital Construction by the State Taxation Administration, recovered RMB 16 million yuan—the expense for capital construction of its sub-office building in Badong County, Hubei and its general office brought the balance of RMB 298 million yuan into the budgetary arrangement for the next year according to the regulations. Regarding the problem of 3-II, the administration got the agreement from the Ministry of Finance after consultation that starting from 2008, funds from vehicle-purchasing tax would be brought into the scope of compiling and reporting its departmental budget. Regarding the problem of 4-II, its general office retrieved all the funds of the publishing house on credit to its financial account and brought them into its budgetary supervision and also handed over the funds on credit of Jinsanhuan Hotel to the central financial department. Regarding the problem of 5-II, it allocated to its service center the vehicles purchased by Jinsanhuan Hotel and other enterprises with its appropriations and agreed to strictly execute its budget. Regarding the problem of 6-II, the service center brought the balance into uniform supervision of its financial account and made regulations to further strengthen financial supervision.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the taxation administration took measures to correct and solve these problems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

General Administration of Quality Supervision,

Inspection and Quarantine

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from November 2007 to March 2008 budget execution and other financial revenue and expenditure in 2007 of the General Administration of Quality Supervision, Inspection and Quarantine (shortened thereafter as the general administration of quality supervision) and sampling-audited 11 units under the administration.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the general administration of quality supervision consists of the budget of its own, 45 second-grade budgetary units and project-execution units.

The audit findings show that the administration’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the administration has done a good job of organizing compilation and report of its departmental budget, strengthened its budgetary and financial supervision, established and perfected an internal control system, worked out a series of measures to supervise funds of separate items and corrected and solved in earnest the problems found in the course of the previous year’s audit. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings 

(1) The generation administration of quality supervision and some of its subordinate units such as the Chinese standardization association diverted RMB 34.6239 million yuan of budgetary funds.

From 2006 to 2007, the administration itself diverted funds of 16 separate items such as public funds and business funds for inspection and quarantine totaling RMB 26.7348 million yuan to its retired cadres bureau’s basic expenditure and special expenditure of administration permit.

The standardization association under the administration had RMB 2.8375 million yuan of special-item funds for revising standardized system diverted to expenses for business trips and service charges that have nothing to do with the aforesaid item.

The national standardization committee affiliated to the administration diverted RMB 2.7804 million yuan to pay for temporary workers’ wage and public expenses.

The Chinese scientific research institute of inspection and quarantine under the administration diverted RNB 359.200 yuan of the funds for testing residue of import and export food made of animal products —a project supported by technology of entry-exit inspection and quarantine to expenditure of its property management.

The Qinhuangdao bureau of exit-entry inspection and quarantine under the Hebei bureau of exit-entry inspection and quarantine diverted RMB 841.500 yuan of public funds to bonuses for its staff. 

The Inner Mongolia bureau of exit-entry inspection and quarantine under the administration and the Baotou bureau of exit-entry inspection and quarantine under the former bureau diverted respectively special funds for inspection and quarantine and funds for preventing and monitoring epidemic situation and diseases totaling RMB 1.0705 million yuan to subsidize the pay of their staff.

(2) Without approval, the administration and the service center under it turned non-managerial assets into managerial ones and failed to supervise RMB 8.7669 million yuan of the rent collected from managerial assets according to the regulation “income and expenditure must be separated”.

In March 2004, the administration agreed without permission that the service center under it could transform its office building (non-managerial assets) located at No.15 Fangcaodixi Street into a hotel named Jinzhi Business Hotel (managerial assets).

From 2005 to 2007, this service center rented to such units as the inspection limited company under the Chinese inspection and authentication group a part of the administration’s office building and collected rents totaling RMB 8.7669 million yuan, whose practice was in defiance of the regulation “income and expenditure must be separated”.

(3) In defiance of procedures for approving capital construction, the Chinese fiber inspection bureau under the administration invested without permission RMB 24.79 million yuan exceeding its budgetary estimates.

In 2005, the State Development and Reform Commission made a written reply to this bureau’s request for RMB 76.09 million yuan as its budgetary estimates for building a house for testing business. Without permission the bureau changed its initial plan and increased budgetary estimates many times in the course of this project’s construction, and by April 2007 it was expected that this project would exceed its budgetary estimates by RMB 24.79 million yuan.

(4) In September 2007, Chinese special inspection’s Beijing scientific and technological development limited company under the administration, by means of falsely increasing fixed assets, transferred RMB 400.000 yuan of special financial funds to its actual capital.

(5) The administration appropriated RMB 8.7676 million yuan to some non-budgetary units.

From 2006 to 2007, the administration appropriated RMB 8.7676 million yuan of financial funds to its two subordinate units responsible for their own profits and losses—the Chinese association of exit-entry inspection and quarantine and the planning and research center for the state’s standard law.

(6) The administration failed to make a written reply to its departmental budget of RMB 15.20 million yuan in time, affecting the efficiency of making use of this financial fund.

The Ministry of Finance already made its written reply to the administration’s request for RMB 15.20 million yuan of a separate-item fund for “supervising import electronics cleared by the Customs” on April 4 of 2007, but it was on November 26 of the same year that the administration made its written reply to the unit undertaking this project.

(7) The administration and the Chinese association of exit-entry inspection and quarantine under it have failed to go through   register procedures of property right for some of their office buildings. 

The administration has yet to go through register procedures for property right for its office building at No. 2 Hepinglixi Road built in the 1980s. Due to the loss of its contract and receipt for purchasing its office building located in Wangfu Garden, the Chinese association of exit-entry inspection and quarantine has failed to go through register procedures for property right for this building.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for strictly execute the budgets concerned and returning the diverted funds to their original fund channels. Regarding the problem of 2-II, it calls for going through the procedures for approval as soon as possible and supervising the rent proceeds collected in the years ahead according to the regulation “income and expenditure must be separate”. Regarding the problem of 3-II, it calls for going through procedures of the department concerned. Regarding the problem of 4-II, it calls for readjusting the accounts concerned and using the company’s own fund to return to the original fund channel. Regarding the problem of 5-II, it calls for rectifying the malpractice. Regarding the problem of 6-II, it calls for correcting it in the time to come. Regarding the problem of 7-II, it calls for going through the register for property right as early as possible.

The CNAO has made the following suggestion about the problems found in the course of audit that the general administration of quality supervision should further strengthen its control over budget and improve its supervision of state-owned assets.

4.  Implementation of Recommendations

Prior to this audit, the general administration of quality supervision made its self-examination and corrected the problems found in the course of this examination. It has attached great importance to the problems found in this audit, made them public and instructed the units concerned to correct and solve them in earnest. Regarding the problem of 1-II, it has returned part of the diverted fund to its original channel. Regarding the problem of 2-II, it has called on the units concerned to go through the procedure for approval as soon as possible and handle the rent proceeds collected in the years ahead according the financial regulations concerned. Regarding the problem of 3-II, it has called for early completion, check and acceptance of the project concerned and the administration and bureau will jointly share the project funds exceeding the budgetary estimates. Regarding the problem of 4-II, the company has already readjusted the accounts concerned and used its own fund to return to the original fund channel. Regarding the problem of 5-II, it will prevent the reoccurrence of this problem while compiling its budget for 2009. Regarding the problem of 6-II, it has strictly executed its budget starting from 2008 and made its timely written reply according to regulations. Regarding the problem of 7-II, it calls on the units concerned to go through the register procedure for property right as soon as possible.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the general administration of quality supervision corrected and solved these problems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

State Administration of Radio, Film and Television

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from January to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the State Administration of Radio, Film and Television (shortened thereafter as the general administration of radio and television) and sampling-audited its three subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the general administration of radio and television consists of the budget of its own and 24 second-grade budgetary units.

The audit findings show that the administration’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems concerned, that the administration has done a good job of organizing compilation and report of its departmental budget and that it has strengthened its budgetary and financial supervision, established and perfected the systems concerned and corrected and solved in earnest the problems found in the course of the previous year’s audit. However, some problems found in the course of audit need correcting and solving.

2. Main Audit Findings

(1) RMB 1.1876910 billion yuan—the balance of the previous year was not put to use on the basis of the administration’s departmental budget arrangement.

By the end of 2007, the administration failed to put to use on the basis of its departmental budget arrangement RMB 1.1876910 billion yuan—the total advertisement balance of the central television station in the previous year.

(2) RMB 8.18 million yuan was reported as the budget for extra fund and project expenditure. 

In 2007, the administration reported RMB 5.60 million yuan as “business subsidies for radio, film and television” and “separate-item funds for radio, film and television reform research of development subjects” and RMB 2.58 million yuan as the basic expenditure budget of the development and research center.

(3) The net project balance of RMB 12.8443 million yuan was not put to use on the basis of the administration’s department budget arrangement.

By the end of 2006, the administration failed to put to use on the basis of its 2007 budget arrangement RMB 4.2219 million yuan of the net balance of “the separate-item fund for a project”, RMB 1.6459 million yuan of the net balance of the central television station’s project of renting a satellite covering Southeast Asia and RMB 6.9765 million yuan of the net project balance of “working separate item of a project”.

(4) RMB 80.1114 million yuan-- the balance of project expenditure was not charged to accounts.

By the end of 2007, RMB 80.1114 million yuan—the accumulated balance of project expenditure of the administration’s appropriations to 3 project undertaking units such as the radio and film planning institute was not kept under the heading of separate items.

(5) RMB 37 million yuan of the project expenditure budget failed to be executed for three years running. 

In 2005, the administration used its off-budget funds to arrange RMB 15 million yuan as its “fund for reforming its publishing house setup” and RMB 22 million yuan as its “fund for reforming its designing institute setup”. By the end of 2007, however, the aforesaid two projects failed to be executed.

(6) RMB 6.8936 million yuan—the budget for the original scientific institutions under it was compiled into its own budget.

In 2007, the administration compiled RMB 6.8936 million yuan—the budget for the original scientific institutions under it into its own budget, of which sum RMB 5.30 million yuan was the project expenditure budget of its planning institute and RMB 1.5936 million yuan that of its film quality inspection institute.

(7) Due to failure to report project budget according to project progress, RMB 11.8303 million yuan was left as unused financial funds.

At the end of 2006, the administration had RMB 9.8456 million yuan—the balance of “the working separate-item project” and in 2007 it reported RMB 10.80 million yuan as the fund for this project. It actually spent RMB 8.8153 million yuan in the year of 2007 and therefore RMB 11.8303 million yuan—the balance accumulated by the end of 2007 was left unused.

(8) The central television station under the administration failed to hand over without delay RMB 3.04686 billion yuan—its non-tax financial proceeds.

In 2006, the Ministry of Finance reformed the financial supervision system of the central television station. According to the stipulation “as the fundamental source for its funds, 15% of the central television station’s advertisement earnings is to be handed over to central finance while 85% of them is left to the station itself” prescribed in the Plan for Reforming Financial Supervision of the Central Television Station” (No.2—2007 for Financial Education), and by the end of 2007, non-tax financial proceeds the station should hand over amounted to RMB 3.04686 billion yuan in total. As the department concerned failed to make clear the concrete way to hand over the aforesaid proceeds, these proceeds were not handed over without delay. 

(9) The following are the major problems found in the radio station supervision bureau (shortened thereafter as radio bureau):

a. RMB 58.0909 million yuan was the investment for the project “emergency broadcasting of radio, film and television and news collecting system” completed and put into operation in August 2003, which has yet to be put to the final accounts of financial completion or to the accounts under the heading of fixed assets. By the end of 2007, RMB 60.5091million yuan—the balance of the aforesaid project was still left unused.

b. By the end of 2006, a radio station of this bureau had RMB 28.5560 million yuan—the balance of a separate item fund. In 2007 it got RMB 42.60 million yuan as this item’s budget by application and by the end of 2007, RMB 41.6885 million yuan of the accumulated balance was left unused.

c. In April 2007, the bureau got from the general administration RMB 1.5 hundred million yuan—the extra fund for the special project of mobile multimedia broadcasting technological experiment. As the administration readjusted the overall project plan, this project failed to be executed as scheduled, which let the project’s budgetary fund leave unused by the end of 2007.

d. The budget for the bureau’s personnel funds in 2007 amounted to RMB 2.222794 hundred million yuan, but its actual expenditure was RMB 3.138182 hundred million yuan, of which public funds were used, exceeding the budgetary expenditure by RMB 91.5388 million yuan.

3.  Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, the administration has passed it on to the Ministry of Finance. Regarding the problem of 2-II, it calls for deducting the extra funds concerned from the financial appropriations of 2008. Regarding the problem of 3-II, it calls for bringing the project net balance concerned into the budget arrangement for 2008. Regarding the problem of 4-II, it calls for retrieving the accumulated balance of project expenditure concerned, readjusting the accounts, adding the aforesaid balance under the heading of separate items and bringing it into the budget arrangement for 2008. Regarding the problem of 5-II, it calls on the general administration to retrieve the funds concerned and put them to use by bringing them into budget arrangement. Regarding the problems of 6,7-II, it calls for budget accurate compilation and rational arrangement in the years to come. Regarding the problem of 8-II, it calls on the central television station to consult the department concerned about the channel to hand over its non-tax proceeds. Regarding the problems of a -9-II, it calls on the radio bureau to charge the fixed assets to account and hand over the balance of the project fund to the general administration. Regarding the problem of b-9-II, it calls on the bureau to make rational arrangement of its budget in the time ahead. Regarding the problem of c-9-II, it calls on the bureau to strictly check projects and make rational arrangement of its budget in the years to come. Regarding the problem of d-9-II, it calls on the bureau to strictly execute its budget in the time to come.

The CNAO has made the following suggestion about the problems found in the course of audit that the general administration of radio and television should strengthen its control over project funds, perfect establishment of inventory of departmental administration projects and improve supervision of its subordinate units.

4.       Implementation of Recommendations

Prior to this audit, the general administration of radio and television made its self-examination and corrected the problems found in this examination. It has attached great importance to the problems found in the course of this audit and taken measures in earnest to correct and solve them. Regarding the problem of 1-II, it has decided after consulting the Ministry of Finance to bring the balance of the previous year into its departmental budget arrangement for 2009. Regarding the problem of 2-II, it will report to the Ministry of Finance to deduct the extra funds from its budget of 2008. Regarding the problem of 3-II, it will apply for spending its project balance on an engineering project under construction in 2008 and report to the Ministry of Finance for approval to spend the project balance of the central television station on a project under construction in 2008. Regarding the problem of 4-II, it has called on the units concerned to hand over the balance of their project expenditure by the end of July. Regarding the problem of 5-II, the funds concerned have been retrieved. Regarding the problem of 6-II, it is consulting the department concerned about its solution. Regarding the problem of 7-II, the unused financial funds will be deducted from 2009 budget for the same project. Regarding the problem of 8-II, the central television station handed over all its non-tax proceeds on March 25 2008. Regarding the problem of a-9-II, the radio bureau has put the unused balance on the fixed assets’ account according to the value assessed for the time-being and handed over the project balance to the general administration. Regarding the problem of b-9-II, the bureau will bring the unused funds into the overall arrangement of its budget of 2009. Regarding the problem of c-9-II, the unused funds have been arranged for use in 2008. Regarding the problem of d-9-II, the general administration is exchanges ideas with the department concerned to find its solution.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the general administration has taken measures to correct and solve these problems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

State Administration of Work Safety

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the State Administration of Work Safety (shortened thereafter as the administration of safety) and sampling-audited its nine subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the administration of safety consists of the budget of its own and 55 second-grade budgetary units.

The audit findings show that the administration’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the administration attaches importance to financial and audit work, supervises its subordinate units, perfects financial organizations and enroll plenty of financial employees, strengthens its professional training and building of its internal systems, improve in an active way its accounting and has taken measures in earnest to correct and solve the problems found in the previous year’s audit and its rate for executing audit decision has reached 100 percent. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings

(1) RMB 15 million yuan drawn under the heading of the separate-item funds for safety supervision was spent on non separate items.

The Ministry of Finance made its written reply to the administration of safety’s request for RMB 40 million yuan of its separate item funds for safety supervision in 2007. The administration spent RMB 15 million yuan out of the aforesaid funds as the property management fees for its office building and staff living quarters, amounting to 37.5 % of the total sum.

(2) The large balance of the administration’s funds affected the efficiency of making use of financial funds.

By the end of 2007, the balance of the administration’s separate items totaled RMB 1.854783 hundred million yuan, amounting to 156.69% of RMB 1.1837 hundred million yuan—the budgetary expenditure in 2007 for the administration’s separate items, which affected the efficiency of making use of budgetary funds.

(3) RMB 7.8823 million yuan—proceeds from renting out and lending state-owned assets that was not handed over should be done so.

By the end of 2007, the administration collected RMB 5.0993 million yuan from its subordinate unit resident in Beijing that rented its office house; the company under its service center collected RMB 2.7830 million yuan—the rent for the administration’s business-running house rented to outsiders. The aforesaid proceeds were not handed over according to the regulation “income and expenditure must be separate”.

(4) The service center under the administration should hand over RMB 13.1387 million yuan—the land proceeds of a central government unit that was not done so.

In August 2007, the company under the service center received from a real estate developer RMB 13.1387 million yuan—the compensation for demolishing the administration’s old houses and resettling inhabitants, which was not handed over according to the regulation “income and expenditure must be separate”.

(5) Nine units under the administration rented their office houses without approval and their rent proceeds of RMB 17.3940 million yuan was not brought into their budget that year.

By the end of 2007, nine units—the Chinese coal industry association, the Chinese coal cultural troupe, the service center, the propaganda and education center, the Chinese Work Safety newspaper office, the administration’s information research institute and training center, the international exchange center and the communication and information center-rented their office houses without approval, and collected RMB 31.9807 million yuan of rent proceeds, of which RMB 17.3940 million yuan was not brought into their 2007 budget.

(6) The Chinese coal industry association under the administration disposed of an overseas investment of RMB 52.68 million yuan without approval.

Without approval this association disposed of an overseas investment of RMB 52.68 million yuan, of which RMB 3.83 million yuan of overseas investment was transferred and RMB 25.3905 million yuan of overseas investment cancelled after verification in 2006, and RMB 23.4595 million yuan of overseas investment cancelled after verification in 2007.

(7) The propaganda and education center under the administration paid RMB 1.41 million yuan of printing expenses without going through government purchase procedure.

In April 2007, in defiance of the regulation that purchase should be done with government’s bidding, this center paid a company (which is not a printing unit designated for central government organizations to do purchase) printing fees of RMB 1.41 million yuan. The company sub-contracted this business with a contracted price of RMB 960.000 yuan. The sum this center paid was RMB 450.000 yuan more than the aforesaid price.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision. Regarding the problem of 1-II, it calls for recovering the separate item fund and returning it to its original channel. Regarding the problem of 2-II, it calls for stepping up the progress of budget execution to reduce the balance of funds concerned. Regarding the problem of 3-II, it calls for retrieving the proceeds concerned without delay and handing them over to the state treasury according to the regulation “income and expenditure must be separate”. Regarding the problem of 4-II, it calls for retrieving the land proceeds without delay and handing them over to the state treasury according to the aforesaid regulation. Regarding the problem of 5-II, it calls on the nine units to go through the procedures for approving the rental of state-owned assets and bring their rent proceeds into their budget so as to exercise uniform supervision. Regarding the problem of 6, it calls for going through the approval procedure according to law and readjusting the accounts concerned. Regarding the problem of 7-II, it calls for instructing the propaganda and education center to improve its supervision of government purchase.

The CNAO has made the following suggestions about the problems found in the course of audit that the administration of safety should further strengthen its budgetary supervision and step up the progress of budget execution, that the administration should strengthen its supervision of state-owned assets and perfect supervisory and internal audit organs, enroll more financial audit employees, further improve rules and systems so as to ensure safety and integrity of state-owned assets and that it should also regulate the practice of renting and lending the office houses of its own and its subordinate units.

4.       Implementation of Recommendations

Prior to this audit, the administration of safety made its self-examination and corrected the problems found in the course of this examination. It has attached great importance to the problems found in the course of this audit, held meetings on special subjects many times so as to work out ways to correct and solve these problems. It also called meetings attended by heads and financially responsible members of its subordinate units in Beijing to brief them on this audit and instructed some units concerned to resolutely execute the audit decision and thoroughly act upon the audit suggestions. On the other hand, the administration emphasized that supervision of its departmental budget and financial supervision of its subordinate units should be further strengthened and improved—first, importance must be attached to budgetary supervision; second, supervision of state-owned assets must be strengthened and supervision of making use of and disposing of state-owned assets must be strictly regulated; third supervision of administrative affairs entrusted to institutions must be strengthened. Regarding the problems of 3,4—II, the administration has ordered the units concerned to hand over their proceeds to it by the end of June and hand them over to the state treasury according to the requirement. Regarding the problem of 5-II, the units concerned have submitted the documents of renting their office houses and brought all their proceeds into their own budgets. Regarding the problem of 6-II, the documents concerned have been submitted. Regarding the problem of 7-II, the administration has instructed the propaganda and education center to strengthen its supervision of government purchase and other problems are to be corrected and solved step by step.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the administration of safety has corrected and solved most of them.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

National Bureau of Statistics

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from November 2007 to March 2008 the State Statistics Bureau’s budget execution and other financial revenue and expenditure in 2007 and also sampling-audited its 17 subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the State Statistics Bureau consists of the budget of its own and 73 second-grade budgetary units.

The audit findings show that the bureau’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the bureau has done a good job of organizing compilation and report of its departmental budget, established an internal control system and properly enforced it and that it has attached importance to its auditing self-examination and corrected and solved the problems found in the course of this examination. However, some problems found in the course of audit need correcting and solving.

2.       Problems Found in the Course of Audit

(1) RMB 14.5111 million yuan of project expenses was diverted to compensate for basic expenditure.

In 2007, the State Statistics Bureau diverted RMB 14.5111 million yuan of its project expenses to compensate for its basic expenditure.

(2) RMB 16.5364 million yuan of the funds for “business operation” of the bureau’s subordinate institution in Beijing was diverted.

In 2007, the bureau diverted RMB 16.5364 million yuan of the funds for “business operation” of its subordinate institution in Beijing to its own basic expenditure.

(3) RMB 10.2844 million yuan of its institutions’ budget was charged to the budget of its subordinate administrative units.

In 2007, the bureau listed in the budget for the project “statistics bureaus’ daily business expenditure at and above county level” RMB 10.2844 million yuan—the budget for   its institutions in which supervision of civil servants is not enforced.

(4) Enlarging its expenditure scope, the bureau subsidized its institutions with RMB 5.221 million yuan.

In 2007, enlarging expenditure scope of its own basic expenditure, the bureau subsidized to its institutions RMB 5.221 million yuan, of which RMB 2.831 million yuan was paid as property management fees for its institutions such as its service center and RMB 2.39 million yuan to the service center as subsidy to its staff canteen, which was in fact suspended.

(5) Having its non-managerial office house turned into managerial one without approval, the bureau thus got proceeds of RMB 14.95 million yuan. 

In 2007, the business development center of its service bureau rented out or dealt in part of its office house and therefore the bureau got RMB 14.95 million yuan.

(6) RMB 1.7052 hundred million yuan was the packaged project expenditure the bureau reported, but was later distributed without permission.

In 2007, the bureau reported RMB 1.7052 hundred million yuan-the packaged project expenditure and later distributed the sum without permission—RMB 1.069757 hundred million yuan was allocated to local statistics bureaus and investigation groups, RMB 62.0943 million yuan to its organs and RMB 1.45 million yuan to its subordinate units.

(7) The slow progress of its information project under construction caused a balance of RMB 1.357445 hundred million yuan.

From 2004 to 2007, the total budget arranged for the bureau’s own information project was RMB 1.5833 hundred million yuan; and due to its slow progress, the project’s total expenditure was RMB 22.5856 million yuan (only 14.26% of its total budget) while its balance was RMB 1.357445 hundred million yuan. Of the total budget 2007’s budget was RMB 54.33 million yuan while its actual expenditure was RMB 3.4219 million yuan and its balance RMB 50.9081 million yuan.

(8) Without authorization, 46 service vehicles were allocated, worth RMB 13.7738 million yuan in total.

From 2002 to 2007, with the approval from its leadership and financial and capital construction department, the bureau allocated free of charge 46 service vehicles worth RMB 13.7738 million yuan to local statistics bureaus and investigation groups (3 vehicles were allocated in 2007, worth RMB 470.000 yuan).

(9) 52 vehicles in excess were not transferred to the Government Offices Administration of the State Council in defiance of the latter’s regulations.

The quota of service vehicles for the bureau approved by the aforesaid administration was 34. By the end of 2007, the bureau actually had 86 vehicles, of which 52 vehicles in excess were not transferred to the administration in defiance of its regulations.

(10) The computing center under the bureau diverted RMB 580.000 yuan of project funds.

In 2007, the center diverted RMB 580.000 yuan of project funds for agricultural survey to a project of cooperation free of charge, of which RMB 500.000 yuan was spent on the project “processing the statistical data of the talent resource of the Organization Department of CCCPC” and RMB 80.000 yuan on the project “processing data of CCTV 2006’s economic life survey”.

(11) Enlarging its expenditure scope, the center of statistical data management under the bureau listed under the heading of its project expenditure RMB 5.50 million yuan of basic expenditure.

In 2007, this center diverted RMB 5.50 million yuan of funds for Chinese statistical data archives’ project in operation to the latter’s office building management fees and expenses for this operating project, of which RMB 4.0580 million yuan was property management fees, RMB 530.000 yuan the winter heating fees and RMB 912.000 yuan water and power fees.

(12) RMB 582.000 yuan of the Chinese statistics society’s membership dues was not charged to the society’s financial account.

From 2005 to 2007, membership dues totaling RMB 582.000 yuan the society collected from its 4 sub-societies were still spent by the latter, which were not brought into uniform supervision of the society’s financial account.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for returning the funds for project expenditure to their original channel. Regarding the problem of 2-II, it calls for returning the funds concerned to their units. Regarding the problems of 3,4-II, it calls for correcting them. Regarding the problem of 5-II, it calls for reporting the proceeds to the department concerned for approval and bringing them into supervision according to the regulation “income and expenditure must be separate”. Regarding the problem of 6-II, it calls for going through reporting procedure for approval. Regarding the problem of 7-II, it calls for stepping up execution progress of the project. Regarding the problem of 8-II, it calls for reporting to the Government Offices Administration of the State Council for examination and approval. Regarding the problem of 9-II, it calls for transferring the vehicles in excess according to the regulations. Regarding the problem of 10-II, it calls for returning the project fund diverted to its original channel. Regarding the problem of 11-II, it calls for correcting it. Regarding the problem of 12-II, it calls for bringing the membership dues into uniform supervision.

The CNAO has made the following suggestions about the problems found in the course of audit: the statistics bureau should strengthen supervision of its departmental budget compilation, report its project budget according to law, strengthen supervision of its departmental budget execution and strictly separate basic expenditure from project expenditure; the bureau should strengthen supervision of its assets such as houses and vehicles, report disposal of its assets to the financial department and the Government Offices Administration of the State Council for approval and bring its proceeds into supervision according to the regulation ”income and expenditure must be separate”; the bureau should strengthen supervision of its subordinate units, bring the budgets of all the budgetary units under it into its departmental budget and bring all the income and expenditure of these units into the uniform accounting of their financial accounts; the bureau should further strengthen supervision of project funds and improve the efficiency of making use of these funds; the bureau should work out corresponding measures and methods, strengthen supervision of its subordinate units’ overseas investment, ensure safety and integrity of state-owned assets and further strengthen supervision of its subordinate institutions.

4.       Implementation of Recommendations

The statistics bureau has attached importance to the problems found in the course of audit, briefed its civil servants on them, and called for studying these problems in earnest so as to correct and solve them. Regarding the problem of 1-II, the bureau has returned part of the funds for project expenditure to its original channel. Regarding the problem of 2-II, it has readjusted its 2008 budget arrangement so as to readjusted the diverted funds for” business operation” to their institutions. Regarding the problem of 3-II, it has contacted the Ministry of Finance so as to readjusted the budgets concerned. Regarding the problem of 4-II, it has readjusted its 2008 budget and reduced the settlement fund with its institutions. Regarding the problem of 5-II, it has reported and submitted its instructions to the Government Offices Administration of the State Council awaiting the latter’s reply. Regarding the problem of 6-II, it has corrected it while reporting its 2008 budget. Regarding the problem of 7-II, it is engaged in correcting and solving it—this project’s enlarged construction is launched and most of the project is for purchase bidding. Regarding the problem of 8, it has founded a leading group to clear it up and the group is checking and clearing up this problem. Regarding the problem of 10-II, it is recovering the funds concerned in an active manner. Regarding the problem of 11-II, it is consulting the Ministry of Finance to solve it. Regarding the problem of 12-II, the Chinese statistics society has regulated the standard membership dues and the system to supervise its sub-society’s financial affairs and brought the proceeds of sub-societies’ membership dues into its uniform supervision.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the statistics bureau is actively engaged in correcting and solving them.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

State Intellectual Property Office

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the State Intellectual Property Office (shortened thereafter as the intellectual property office) and sampling-audited its five subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the intellectual property office consists of the budget of its own, three second-grade budgetary units and project execution units.

The audit findings show that the budgetary revenue and expenditure in 2007 of the intellectual property office basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the office has done a good job of organizing compilation and report of its departmental budget, strengthened its budgetary and financial supervision, established and perfected relevant systems and earnestly corrected and solved the problems found in the course of the previous year’s audit. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings 

(1) RMB 5.9163 million yuan—the net balance of the previous year’s financial appropriations was not brought into overall arrangement of the intellectual property office’s 2007 budget.

While applying for RMB 2.70 million yuan—its 2007 budget for its international organization membership due, the intellectual property office failed to bring RMB 3.1606 million yuan—the net balance of this membership due accumulated by the end of 2006 into the aforesaid budget. While applying for RMB 20 million yuan—its 2007 budget for returning its German loan, it failed to bring RMB 2.7557 million yuan--the net balance of this project accumulated by the end of 2006 into the aforesaid budget.

(2) The expenditure of RMB 1.097257 million yuan—the balance of the previous year’s funds was not brought into 2007 budgets.

In 2007, RMB 14.0765 million yuan—the balance of its previous year’s funds spent by the office, RMB 3.7662 million yuan—the balance of its previous year’s funds for the patent acceptance project of examining and approving separate items spent by the patent re-examination committee under the office, RMB 91.765 million yuan—the balance of its previous year’s funds for the patent acceptance project of examining and approving separate items spent by the patent bureau under the office (shortened thereafter as the patent bureau) and RMB 118.000 yuan—the balance of its previous year’s funds for the nationwide project of intellectual property training spent by the Chinese intellectual property training center (shortened thereafter as the training center) were not brought into their budgets.

(3) The budget of interest proceeds in 2007 was not compiled. 

While compiling their 2007 budgets, the office and patent bureau failed to compile the budget of their interest proceeds. Their interest proceeds in 2007 totaled RMB 1.5426 million yuan.

(4) RMB 92.3337 million yuan—the income and expenditure of some of the units that are responsible for their own profits and losses was not brought into the office’s budget.

The office did not bring into its 2007 budget RMB 92.3337 million yuan—the income and expenditure in 2007 of its six subordinate units that are responsible for their own profits and losses.

(5) There was no open bidding for the large-scale renovation project with an investment of RMB 2 million yuan of the training center’s teaching building.

In 2007, the office made a written reply to the training center’s request for financial funds of RMB 2 million yuan for the aforesaid project. By means of tender inviting, the center let the Litiandacheng Decoration Project Co. Ltd undertake the project of renovating the basement and office zone of its teaching building without open bidding.

(6) RMB 80 million yuan—the project budgets of some units under the office--was not specified.  

RMB 2 million yuan—the training center’s 2007 budget for the nationwide intellectual property training project was not finalized on the new inspector training projects. There was no concrete specified content for RMB 5 million yuan—the budget of this center’s project of intellectual property education platform. There was no concrete specific content for RMB 48 million yuan—the patent-examination coordination center‘s 2007 budget of financial appropriations for the patent acceptance project of examining and approving separate items. There was no concrete specific content for RMB 25 million yuan—the 2007 financial appropriations’ budget of the state intellectual property press (shortened thereafter as the press) for the patent acceptance project of examining and approving separate items.

(7) RMB 1.1423 hundred million yuan— the non-tax proceeds the training center should collect was neither collected nor handed over.

By December 31, 2007, RMB l.1423 hundred million yuan—10% of the overseas patent correspondent funds for running schools the training center should collect from agencies before December 31 of 2007 was not collected nor handed over.

(8) RMB 6.60 million yuan—the press’s investment income—was not made clear on its account.

In January 2006, after receiving RMB 6.60 million yuan—its investment income distributed by the Zhangcheng securities company, the press transferred the sum to its account in the Beijing securities company without confirming this investment income or its extra investment in the aforesaid company. 

 

3.  Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for making a comprehensive arrangement for the next year’s budget so as to offset the financial appropriations of the corresponding projects. Regarding the problem of 2-II, it calls for correcting it while compiling the next year’s budget. Regarding the problem of 3-II, it calls for correcting it while compiling the next year’s budget. Regarding the problem of 4-II, it calls for correcting it in the time ahead. Regarding the problem of 5-II, it calls for strictly enforcing relevant stipulations prescribed in the government purchase act and tender submitting and inviting act. Regarding the problem of 6-II, it calls for specifying project budgets in the future. Regarding the problem of 7-II, it calls for attaching importance to it so as to hand over without delay the full sum of the funds retrieved to central finance. Regarding the problem of 8-II, it calls for readjusting the press’s accounts.

4.  Implementation of Recommendations

Prior to this audit, the intellectual property office made its self-examination and corrected the problems found in the course of this examination. It has attached great importance to the problems found in the course of this audit, made meticulous efforts to help units concerned execute the aforesaid audit decision and correct and solve in earnest the aforesaid problems. Regarding the problem of 1-II, it has brought some of the funds concerned into its 2008 budget and planned to bring the rest into its 2009 budget. Regarding the problem of 2-II, it will bring the balance of the funds concerned into its next year’s budget after reporting to the Ministry of Finance for approval. Regarding the problem of 3-II, it will bring the interest proceeds into its next year’s budget after compiling and reporting it. Regarding the problem of 4-II, it will bring into its next year’s budget the income and expenditure concerned. Regarding the problem of 5-II, it will perfect relevant supervisory stipulations and strictly enforce the stipulations prescribed in the government purchase act and tender submitting and inviting act while engaging in the government purchase activities. Regarding the problem of 6-II, it has specified its 2008 budget for these projects. Regarding the problem of 7-II, the training center has tried hard to urge these agencies to hand in the funds concerned. Regarding the problem of 8-II, the office readjusted its accounts concerned in April 2008 and will readjust its tax payment according to report forms.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the intellectual property office is correcting and solving them.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

National Tourism Administration

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from January to May 2008 the National Tourism Administration’s budget execution and other financial revenue and expenditure in 2007 and sampling-audited the service center and information center under the administration.

1.       Overall Situation

As a first-level budgetary unit of central finance, the departmental budget of the National Tourism Administration consists of the budget of its own and five second-grade budgetary units.

The audit findings show that the administration’s revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the administration has done a good job of organizing compilation and report of its departmental budget, strengthened its budgetary and financial supervision, established and improved relevant systems and corrected and solved in earnest the problems found in the course of the previous year’s audit. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings 

(1) RMB 2.4476 million yuan was spent as extra subsidies.

Since December 2006, due to its inaccurate understanding of the stipulations prescribed in the policies concerned and inaccurate application of the policy standards, the administration has granted to its working staff various kinds of subsidies totaling RMB 2.4476 million yuan.

(2) State-owned assets were lent free of charge.

The administration provided its building with an area of 10.367 square meters situated in Tongzhou District of Beijing for free use by Beijing Jinlu Scientific and Technological Investment Co. Ltd, Beijing Jinluyatu Information Science and Technology Co. Ltd, Beijing Xinhualu Demonstration Co.Ltd, and Beijing Jinluyu Storage Consultancy Co. Ltd. It did not collect rents according to the regulations.

(3) RMB 3.3654 million yuan of the rent proceeds was not brought into budgetary supervision.

By renting part of its office building, the administration collected its rent proceeds of RMB 1.6854 million yuan and RMB 1.68 million yuan respectively in 2006 and 2007, totaling RMB 3.3654 million yuan—which was diverted as “other income” of the service center and therefore not brought into its own budgetary supervision.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls on the tourism administration to correct and solve it according to the set framework and standard and retrieve the extra subsidies in full granted since December 1 of 2006. Regarding the problem of 2-II, it calls on the tourism administration to clear up the free use of its building by signing house leasing contracts with those companies which want to continue to use the building and making clear the standard for rent collection agreed by both sides and their rights and obligations as well as handing over the previous year’s rents. Regarding the problem of 3-II, it calls on the administration to retrieve the rent proceeds from the service center and bring them into its budgetary supervision and use.

The CNAO has made the following suggestion about the problems found in the course of audit that the tourism administration should regulate supervision of its assets and bring state-owned assets into its budget so as to ensure their safety.

4.       Implementation of Recommendations

Prior to this audit, the tourism administration made its self-examination and corrected the problems found in the course of this examination. It has attached great importance to the problems found in the course of this audit and entrusted the units concerned to correct and solve them in earnest. Regarding the problem of 1-II, except for few special cases, most of the subsidies have been retrieved, and the rest will be retrieved by the end of 2008. Regarding the problem of 2-II, it is straightening things up with the companies concerned and will hand over its previous year’s rent proceeds. Regarding the problem of 3-II, it has retrieved its rent proceeds from its service center and will bring them into its own budgetary supervision.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the tourism administration has corrected and solved most of the problems.

               Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Overseas Chinese Affairs Office of the State Council

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from November 2007 t0 February 2008 the budget execution and other financial revenue and expenditure in 2007 of the Office of Overseas Chinese Affairs and sampling-audited its three subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the Office of Overseas Chinese Affairs consists of the budget of its own and six second-grade budgetary units.

The audit findings show that the office’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the office has done a good job of organizing compilation and report of its departmental budget, made systems concerning use and supervision of funds and mainly corrected the problems found in the course of the previous year’s audit. However, some problems found in the course of this audit need correcting and solving.

2.       Main Audit Findings 

(1) RMB 10.4854 million yuan—the balance of project funds of both the office and China News Agency under it has long remained on credit.

The office suspended its power transforming project launched in 1999 due to the fact that some conditions were not available for this project and therefore by the end of 2007, RMB 485.400 yuan still remained on credit.

RMB 10 million yuan—the project budget approved by the former State Planning Commission in 2001 for China News Agency to purchase residential houses remained as the full balance by the end of 2007 as this project failed to be executed.

(2) Chinese Institute of Beijing under the office diverted other project funds of RMB 15.5679 million yuan to build students’ dormitory.

From 2000 to 2002, this institute (the former Beijing Overseas Chinese Continuation School) diverted RMB 10.5679 million yuan of repair and purchase special funds from education expenditure and RMB 5 million yuan of subsidies for Chinese education in the course of building its student’s dormitory.

(3) The service center and China News Agency under the office made use of state-owned assets worth RMB 8.7124 million yuan in defiance of regulations.

Since 2006, the service center rented out without approval its canteen restaurant and the house attached to it worth RMB 5.99 million yuan.

Since 2001, China News Agency rented out the first to fourth floor of its west wing building worth RMB 2.7224 million yuan without approval.

(4) RMB 1.8523 million yuan—the rent proceeds of the service center was not brought into its budget.

By the end of 2007, the service center failed to bring into its budget RMB 1.8523 million yuan—the rent proceeds of its canteen restaurant and the house attached to it.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls on the Office of Overseas Chinese Affairs and China News Agency to bring into their respective budget the balance of their project funds. Regarding the problem of 2-II, it calls on the institute to return the diverted funds to its original channel. Regarding the problem of 3-II, it calls for going through the procedures for checking and approving the state-owned assets to be rented out. Regarding the problem of 4-II, it calls for bringing into the service center’s budget all the rent proceeds so as to facilitate its uniform accounting and supervision.

The CNAO has made the following suggestions about the problems found in the course of audit that the office should strengthen its system building and budgetary supervision, compile and execute its budget strictly according to the requirements of the Budget Act, stop the malpractice such as diverting funds for other projects to capital construction and raise the efficiency of making use of budgetary funds and that the office should strengthen its guidance and supervision of its subordinate units’ budget execution and asset management and raise its supervisory standard.

4.       Implementation of Recommendations

Prior to this audit, the office made its self-examination. It has attached great importance to the problems found in the course of this audit and instructed the units concerned to correct and solve them in earnest. Regarding the problems of 1,4-II, it has channel into its 2009 budget draft the funds concerned Regarding the problem of 3-II, the two units have gone through the office’s procedures for examination and  approval. Regarding the problem of 2-II, the office is assisting the institute in reporting it to the superior responsible department so as to acquire funds for the latter’s capital construction and return the diverted funds to its original channel.

In addition, the CNAO has issued another letter of audit suggestions about the problems of abnormal supervision found in the course of audit and the Office of Overseas Chinese Affairs is correcting and solving them according to the aforesaid suggestions.  

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Legislative Affairs Office of the State Council

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to February 2008 the budget execution and other financial revenue and expenditure in 2007 of the Office of Legislative Affairs under the State Council (shortened thereafter as the Office of Legislative Affairs) and sampling-audited its two subordinate units.

1.       Overall Situation

As a first-level budgetary unit of central finance, the departmental budget of the Office of Legislative Affairs consists of the budget of its own and three second-grade budgetary units.

The audit findings show that the office’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the office has done a good job of organizing compilation and report of its departmental budget, drew up measures of internal control such as Tentative Measures for Financial Supervision of the Office of Legislative Affairs under the State Council, Measures for Supervising the Office’s Fixed Assets and Tentative Measures for Supervising Funds for the Government Research Subjects of Legislative Affairs, and strengthened its budgetary and financial supervision. However, some problems found in the course of audit need correcting and solving.

2.       Main Audit Findings

(1) RMB 7.8983 million yuan was not brought into supervision of the office’s departmental budget.

While compiling and reporting its 2007 budget, the Office of Legislative Affairs failed to bring into its departmental budget the following funds, of which RMB 965.000 yuan was the balance of funds for the office’s capital construction accumulated over the years that was on credit under the heading of “temporary deposit”, RMB 518.100 yuan was the balance of medical care funds taken care of by the service center, RMB 6.25 million yuan was the service center’s business proceeds and RMB 165.200 yuan was the business funds used to offset the deficit between income and expenditure; the aforesaid funds totaled RMB 7.8983 million yuan.

(2) RMB 5.7354 million yuan—the separate item funds for capital construction were left unused for too long.

From 2001 to 2003, RMB 8.38 million yuan—the separate item funds for capital construction the Ministry of Finance appropriated to the office was mainly used for the project of adding a new floor to the auxiliary office building and transforming the office’s old building. By the end of 2007, RMB 2.6446 million yuan was spent, making up only 31.56 % of the aforesaid budgetary appropriations and RMB 5.7354 million yuan remained as the accumulated balance. Though it found this problem in the course of its self-examination, the office failed to correct it according to the relevant regulations of the Ministry of Finance.

(3) RMB 800.000 yuan was the overseas investment canceled after verification by the service center without approval, and the readjusted investment was not reflected in the center’s accounts.

In January 2001, the service center signed an agreement on investment share--holding with Beijing Dameikang new scientific and technological medicine research Co. Ltd. As the center invested RMB 2.08 million yuan, making up 52% of the company’s shares, this investment was always calculated in the form of current account. From 2001 to 2002, the center retrieved RMB 1.28 million yuan, but the balance of RMB 800.000 was not reported to the responsible department for approval so as to cancel it after verification. In August 2007, the company changed its registered capital, which caused the center’s registered capital of RMB 2.08 million yuan to be reduced to RMB 450.000 yuan, making up 90% of the aforesaid shares. By the end of this audit, neither the aforesaid investment nor its profits and losses were reflected under the heading of investment.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for bringing into budgetary supervision the balance and proceeds concerned according to the regulations. Regarding the problem of 2-II, it calls for making use of the unused funds as soon as possible according to the regulations. Regarding the problem of 3-II, it calls for strengthening supervision of funds and assets and perfecting the procedures for reporting and approving relevant business.

The CNAO has made suggestions about the problems found in the course of audit that the Office of Legislative Affairs should enhance its sense of compiling its comprehensive budget, fulfill its duty of supervising and managing its financial affairs, oversee its subordinate units to enforce in earnest financial supervision system and do a good job of accounting, budget compiling and reporting as well as final account checking and collecting.

  

4.  Implementation of Recommendations

Prior to this audit, the Office of Legislative Affairs made its self-examination and solved some of the problems found in the course of this examination. It has attached great importance to the problems found in the course of this audit, corrected and solved them in earnest. Regarding the problem of 1-II, it will bring the balance and proceeds concerned into its next year’s budgetary supervision. Regarding the problem of 2-II, it reported to and submitted to the Ministry of Finance in February 2007 and will make use of the balance of funds according to the demand set in the latter’s written reply. Regarding the problem of 3-II, its service bureau is readjusting its accounts according to the set demand and studying ways to perfect the procedures for disposing assets.

In addition, the CNAO has issued another letter of audit suggestions about the problems of abnormal supervision found in the course of audit and the office has corrected and solved some of these problems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Chinese Academy of Sciences

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the Chinese Academy of Sciences and sampling-audited its 10 subordinate units.

1.       Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the Chinese Academy of Sciences consists of the budget of its own and 116 second-grade budgetary units.

The audit findings show that the academy’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the academy has done a good job of organizing compilation and report of its departmental budget, strengthened its budgetary and financial supervision, established and perfected its system of internal control, corrected and solved in earnest the problems found in the course of the previous year’s audit and therefore its rate of executing audit decision has reached 100%. However, some problems found in the course of audit are required to be corrected and solved.

2.       Main Audit Findings

(1) RMB 1.427 billion yuan of budgetary funds was not specified to or given a written reply to the academy’s subordinate units concerned.

By the end of 2007, RMB 1.427 billion yuan accumulated in the academy’s 2007 budget was neither specified to nor given a written reply to its subordinate units concerned.

(2) RMB 22.2112 million yuan was the separate item funds some of the academy’s subordinate units acquired by means of enlarging their expenditure scope.

a.       In 2007, of the separate item funds appropriated by the academy for maintaining great scientific projects in operation RMB 12.4354 million yuan was the management and housing expenses the high energy physics research institute planned to draw by enlarging its expenditure scope without permission, and RMB 389.400 yuan was the funds for transforming restaurant bathroom, vehicle-purchasing and consultancy drawn by the remote-sensing satellite ground station.

b.       RMB 6.4240 million yuan was the post graduate funds drawn by the electronic engineering research institute in 2006 from the knowledge renovation project cost, and RMB 1.1075 million yuan was the funds for repair and purchase planned to draw by this institute and RMB 600.000 yuan was the supplement medical care funds drawn by the institute; and therefore the aforesaid sums totaled RMB 8.1315 million yuan.

c.       RMB 1.2549 million yuan—the balance of funds for its seven knowledge renovation projects already completed such as “research related to seismology” was used by the geological and geophysical research institute to deduct its scientific research cost,  of which RMB 92.000 yuan was used in 2006 and RMB 1.1629 million yuan used in 2007.

(3) RMB 1.435923 hundred million yuan—the funds of some of the academy’s subordinate units--was not brought into the academy’s budgetary supervision, of which sum RMB 18.2936 million yuan was not done so in 2007.

a. From 2000 to 2007, the graduate school under the academy got RMB 92.9637 million yuan of training proceeds and spent RMB 87.8335 million yuan (its proceeds was RMB 12.1923 million yuan and expenditure RMB 11.6208 million yuan in 2007). From 2003 to 2007, the school’s hostel got RMB 4.1286 million yuan of service proceeds such as accommodation and training and spent RMB 3.4912 million yuan (its proceeds was RMB 1.2013 million yuan and expenditure RMB 919.900 yuan in 2007). The aforesaid income and expenditure were not brought into the academy’s budgetary supervision.

b. From 2005 to 2007, the proceeds acquired by the national nanometer scientific center and nanometer technology and engineering research institute under the academy totaled RMB 43 million yuan and their expenditure RMB 12.27 million yuan (of which their income was RMB 1.40 million yuan and expenditure RMB 10.1467 million yuan in 2007), and the aforesaid income and expenditure were not brought into the center’s budgetary supervision.

c. In 2007, Suzhou technological research school of the physics research institute under the academy earned RMB 3.50 million yuan and spent RMB 710.000 yuan, and the two sums were not brought into the institute’s budgetary supervision.

(4) The computer network information center failed to collect RMB 13.9583 million yuan of funds it should for managing the operation of domain names of its subordinate companies and paying on behalf of these companies (of which sum RMB 1.9846 million yuan was not collected from January to November 2007).

As a full capital company under the aforesaid information center, Zhongkesanfang Network Technology Co. Ltd is mainly an agent for domain names. From 2002 to November 2007, the center drew from its scientific research cost funds totaling RMB 5.3380 million yuan for international domain name acting fees, expenses of property management, water and power as well as lunch subsidies the company should undertake (of which sum RMB 375.000 yuan was drawn from January to November 2007). The center failed to collect RMB 8.6203 million yuan it should do so—the relevant funds such as those for managing the operation of domain names (of which sum RMB 1.6096 million yuan was not collected from January to November 2007).

3.  Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for budgetary expenditure to be guaranteed for its concrete project and executing unit according to the regulations prescribed in the reform of the state financial setup. Regarding the problem of 2-II, it calls for readjusting the relevant accounts. Regarding the problem of 3-II, it calls for following the relevant regulations in the years ahead. Regarding the problem of 4-II, it calls for retrieving the funds concerned and readjusting the relevant accounts as soon as possible.

The CNAO has made the following suggestions about the problems found in the course of audit that the Chinese Academy of Sciences should improve its departmental and comprehensive budget, strengthen its supervision and check of ways of using financial separate item funds and supervise budgetary and financial affairs of units at three grades.

4. Implementation of Recommendations

Prior to this audit, the Chinese Academy of Sciences made its self-examination and corrected the problems found in the course of this examination. It has taken measures in earnest to correct and solve the problems found in the course of this audit. Regarding the problem of 2-II, it has corrected it according to the regulations. Regarding the problem of 3-II, it made it clear that the academy would follow the relevant regulations. Regarding the problem of 4-II, the center has retrieved the funds and readjusted the relevant accounts. To strengthen its supervision of funds for scientific research projects, the academy issued the document Circular on Strengthening Supervision over Funds for Scientific Research Project Contracts.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the academy has corrected and solved them.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Chinese Academy of Social Sciences

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the Chinese Academy of Social Science and sampling-audited its seven subordinate units.

1. Overall Situation

As a first-level budgetary unit of central finance, the departmental budget of the Chinese Academy of Social Sciences consists of the budget of its own and 43 second-grade budgetary units.

The audit findings show that the academy’s budgetary revenue and expenditure in 2007 basically conform with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act and accounting norms and systems, that the academy has done a good job of organizing compilation and report of its departmental budget, strengthened its budgetary and financial supervision, established and perfected relevant systems and corrected and solved the problems found in the course of the previous year’s audit. However, some problems found in the course of audit need correcting and solving.

2.  Main Audit Findings 

(1) No written reply was promptly given to the budget of RMB 16.7152 million yuan, which was not specified.

While compiling and reporting its 2007 departmental budget, the Chinese Academy of Social Sciences failed to specify it to concrete projects and their execution units according to the regulations. Therefore, after receiving the written reply of the Ministry of Finance to its departmental budget, the academy failed to give a written reply to its subordinate units’ request for financial funds of RMB 16.7152 million yuan at the beginning of 2007 and RMB 10.0311 million yuan was not specified to or given a written reply to its budgetary units at the end of the same year.

(2) RMB 10.0938 million yuan was the funds diverted by the contemporary China research institute and Russia, Eastern Europe and Middle East research institute.

a.         By the end of 2001, the contemporary institutes diverted RMB 9.7790 million yuan of financial funds to purchase and build staff residence totaling 67 flats and invest in the capital construction of “auxiliary building attached to the west office building” and the aforesaid sum has not been returned.

b.         From September 2006 to September 2007, the trade union of the other institute sent some of the institute staff on tourist trips to Guizhou, Hunan and Sichuan and RMB 314.800 yuan of traveling expenses was drawn under the headings of “basic expenses” and “project expenses”, of which RMB 215.200 was drawn in 2007.

(3) RMB 4.5563 million yuan was financial funds and other public funds transferred, unlawfully deposited and let go by the aforesaid two institutes.

a.         In March 2006, the contemporary institute transferred RMB 4.1521 million yuan—the falsely listed business expenses in the name of repairing the institute’s building and buying bookshelves to Beijing contemporary service center—its subordinate entity, and then retrieved from the center RMB 1.27 million yuan and transferred RMB 2.8821 million yuan of the remaining funds to the national history society under its care. In September 2007, the institute retrieved the remaining funds according to the academy’s supervision bureau, but later transferred the funds again to the service center. It was during this audit in February 2008 that the institute again retrieved the funds.

b.         In October 2000, this institute paid a unit RMB 245.300 yuan under the heading of “undertaking expenses” for buying its boiler, whose actual price was RMB 58.900 yuan. In November 2000, it asked the unit to transfer RMB 186.400 yuan-the extra fund paid to the service center. In March 2006, the center returned the aforesaid funds to the institute to deduct its current account on credit.

c.         At the beginning of 2006, the other institute put RMB 217.800 yuan of rents and car--using funds under an individual’s care, which sum was not kept in its accounts (RMB 124,800 yuan was put in 2006 and RMB 93.000 yuan in 2007). Of the aforesaid sum RMB 217.000 yuan was spent (of which RMB 89.300 yuan was spent in 2007): RMB 186.700 yuan was spent as its staff’s subsidies, RMB 30.300 yuan as temporary workers’ hospitalizing expenses and living allowance and RMB 800 yuan remained as surplus.

(4) RMB 95.0650 million yuan—the funds for its subordinate second-grade budgetary units--was not brought into budget.

In 2007, RMB 3.5905 million yuan was the proceeds the academy’s second-grade budgetary units got from renting out their houses, RMB 83.3714 million yuan their subject proceeds, RMB 3.4958 million yuan their proceeds for running classes in cooperation with other units and launching post-doctoral studies and RMB 4.6073 million yuan was the proceeds acquired by other units attached to and taken care of by the aforesaid units. All the proceeds were not brought into the budget-compiling framework and budgetary supervision of these units.

3.       Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for specifying financial budget funds and giving written replies to the units concerned. Regarding the problem of 2-II, it calls for ordering the two institutes to readjust their respective accounts and retrieving the financial funds that should be retrieved. Regarding the problem of 3-II, it calls for ordering the two institutes to readjust their respective accounts, retrieving the financial funds, bringing into the financial accounts their funds in bootleg’s account, confiscating the falsely listed funds and handing them over to the central financial department. Regarding the problem of 4-II, it calls on the units concerned to bring into their budgets various proceeds they have acquired in the time ahead.

The CNAO has made the following suggestions about the problems found in the course of audit that the academy should strengthen its supervision and examination of its subordinate units’ management of budgetary financial affairs and assets so as to ensure the safety and efficiency of budgetary funds. 

4. Implementation of Recommendations

The Chinese Academy of Social Sciences has attached great importance to the problems found in the course of this audit and instructed the units concerned to correct and solve in earnest these problems. Regarding the problem of 1-II, it promises that it will improve and perfect its practice. Regarding the problem of 2-II, the contemporary institute was unable to return RMB 9.2016 million yuan—the financial funds it diverted for purchasing and building its staff’s flats—and RMB 404.000 yuan—the project funds for capital construction not included in its budget, other accounts concerned have been readjusted and other financial funds recovered. Regarding the problem of 3-II, the contemporary institute has readjusted the accounts concerned and handed over to the central financial department RMB 186.400 yuan—the false listed sum for buying the boiler and the Russian-Europe-Asia institute has brought into its financial accounting all the funds off account. Regarding the problem of 4-II, the second-grade budgetary units concerned have agreed to bringing those proceeds into their next year’s budgets.

In addition, the CNAO has issued another letter of audit suggestions about the problems of abnormal supervision found in the course of audit, and the academy has corrected these problems.

Audit Findings on 2007 Budget Implementationand

Other Financial Revenues and Expenditures of the

Development Research Center of the State Council

According to the stipulations prescribed in the Audit Act of the People’s Republic of China, the National Audit Office (CNAO) audited from December 2007 to March 2008 the budget execution and other financial revenue and expenditure in 2007 of the Development Research Center of the State Council (shortened thereafter as the Development Research Center) and sampling-audited its three subordinate units.

1.  Overall Situations

As a first-level budgetary unit of central finance, the departmental budget of the Development Research Center consists of the budget of its own and three second-grade budgetary units.

The audit findings show that the center’s budgetary revenue and expenditure in 2007 basically conforms with the stipulations prescribed in the state’s related budget and financial statutes, that its accounting sanction basically conforms with the stipulations prescribed in the Accounting Act, accounting norms and systems, that the center has done a good job of organizing compilation and report of its departmental budget, established and perfected relevant systems and worked out systems of internal control such as the document Tentative Measures for Supervising Financial Affairs of the Development Research Center of the State Council and that it has strengthened its budgetary and financial supervision so that its budgetary supervision and financial accounting level improved gradually. However, some problems found in the course of audit are required to be to be solved. 

2. Main Audit Findings 

(1) The accumulated balance of the previous year’s subject funds and this year’s revenue and expenditure of the center, the information center and market research institute under it were not brought into budgetary supervision.

RMB 60.2772 million yuan--the aforesaid balance accumulated by the end of 2006, RMB 29.853 million yuan—the total revenue and RMB 27.2853 million yuan—the expenditure in 2007 as well as RMB 62.8449 million yuan--the accumulated balance by the end of 2007 were not brought into budgetary supervision.

(2) RMB 2.55 million yuan—the proceeds of management fees--was not brought into supervision of off-budget funds.

In 2007, the center collected from 11 subordinate units and units attached to it management fees of RMB 2.55 million yuan, which was not brought into supervision of off-budget funds.

(3) RMB 4.4181 million yuan of public funds was misappropriated as personnel funds.

In 2007, out of RMB 8.2598 million yuan—the center’s budget for personnel funds, RMB 12.6779 million yuan was actually used, with public funds of RMB 4.41 million yuan misappropriated

3.  Audit Disposition and Audit Recommendations

Regarding the aforesaid problems, the CNAO has promptly written its audit report and issued its letter of audit decision according to the stipulations prescribed in the state’s laws and statutes. Regarding the problem of 1-II, it calls for bringing the balance, revenue and expenditure concerned into budgetary supervision, working out supervisory measures to supervise and make good use of budgetary funds. Regarding the problem of 2-II, it calls for bringing into account supervision of funds off-budget and enforce the regulation “revenue and expenditure must be separate”. Regarding the problem of 3-II, it calls for executing the center’s budget strictly according to the Budget Act.

The CNAO has made the following suggestions about the problems found in the course of audit that the center should enhance its sense of comprehensive budget, strengthen its supervision over projects of social subjects, further improve its system of internal control and its standard of financial accounting and earnestly perform its duty to supervise the financial affairs of its subordinate units.

4. Implementation of Recommendations

Prior to this audit, the center made its self-examination and corrected the problems found in this examination. It has attached great importance to the problems found in the course of this audit and held many meetings to work out measures to correct and solve them. Regarding the problem of 1-II, in conjunction with the Ministry of Finance, it has formed a specialist group to study measures to make a system to supervise subject expenses and is correct and solving this problem. Regarding the problem of 2-II, it will stop collecting management fees from these units. Regarding the problem of 3-II, it will regulate the compilation of its personnel fund budget and strictly execute its budget.

In addition, the CNAO has issued another letter of audit suggestions about other problems of abnormal supervision found in the course of audit and the Development Research Center is taking active measures to correct these problems. 

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Meteorological Administration 

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to March 2008, on the performance of the budget of the China Meteorological Administration for 2007 and other financial revenues and expenditures and test audits on three of its affiliated units.

1. Background

The China Meteorological Administration is a first-class budgetary unit of central finance, and the budget is composed of the budget of its own budgetary level and the budgets of 50 second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the China Meteorological Administration for 2007 basically conformed to the relevant provisions of the budgetary, and financial  laws and regulations of the state, the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems , and that the Administration was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further strengthen the management of the budget and financial affairs, establish and improve the relevant systems, and earnestly address the problems that arose in the audits of the previous years.  However, there were also some problems were disclosed during the audit that need resolution and rectification.

2. Main problems found in the audit

(1) An amount of 4,867,800 yuan of the project funds was used exceeding the scope of application of the fund.

From 2006 to 2007, the China Meteorological Administration, under the two projects of “the special item of buying communication vehicles for tough areas” and “the unified allocation of special vehicles for observatories and stations at basic levels”, arranged 4,867,800 yuan for paying the price differences in buying vehicles for part of non-tough (basic level) meteorological observatories and stations.

(2) Self-approval of an adjustment of the project budget by 3.95 million yuan.

During June-July, 2007, the China Meteorological Administration gave approval by itself to the commencement of four non-budgeted projects including the project of the affiliated State Satellite Meteorological Center “for product development in the early-warning technique and expertise in relation to the space weather monitoring”, with the funds of 3.95 million yuan derived from project funds including “the expense for maintaining the operation of the basic meteorological business”.  The above-mentioned four projects were not listed into the budget for project expenses of the China Meteorological Administration for 2007 approved by the Ministry of Finance.

(3) The rental income of 1,384,300 yuan of the affiliated State Satellite Meteorological Center was not included in the budget management

From 2006 to 2007, the State Satellite Meteorological Center rented out part of the office space, and the rental income for the two years added up to 1,384,300 yuan. The income was placed under the accounting and management of the affiliated Beijing Fengyun Satellite Meteorological Scientific and Technological Co. and was not incorporated into the budget of the Center.

(4) 764,300 Yuan of the project fund had been spent by some institutions subsidiaries exceeding the scope of application of the fund..

a. In 2007, the State Meteorological Information Center arranged 224,600 yuan under the four projects including “inspection of products of multi-track business and the assessment of their results”,  for paying expenses of other businesses and overtime wages, which were exceeding the scope of the above-mentioned project funds.

b. In 2007, the State Meteorological Center arranged 539,700 yuan from the item of “the expense for maintaining the operation of the basic meteorological business” for paying public current expenses of the Center and other businesses, which were beyond the permitted range  in so far as the above-mentioned project funds are concerned.

(5) The rate for materializing the expenses for part of the projects was low in part of the affiliated units.

a. Up to the end of 2007, the execution rate for the five projects including “the quantitative assessment of the accuracy in observing the specific property of the radiation of gas soluble gum and the research on a new observation method” conducted by the State Satellite Meteorological Center was less than 50%, and the balance of the project funds was 11,919,300 yuan.

b. Up to the end of 2007, the execution rate for the two projects including “the research and demonstration of the technology of departmental emergency platform” was below 50%, and the balance of the project funds was 3,379,300 yuan.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions. Concerning the problem of using project exceeding of the scope,  the funds were required to be recovered. Concerning the problem of self-approval of the adjustment of project budget, the funds were demanded to be returned to the source through the original channel. Concerning the problem of failing to incorporate the rental income of the State Satellite Meteorological Center into the budget, it demanded that the funds be recalled and incorporated into the budget for management. Concerning the problem of using project funds out of the spending range by part of the affiliated units, it demanded that the expenses be taken out of the book as they should not be disbursed from the project funds. Concerning the problem of the low rate in materializing the expenses for part of the projects in part of the affiliated units, it demanded that in future,the projects should be executed in strict accordance with the project budgets approved by the Ministry of Finance, the progress of executing the projects be accelerated and the effects in using funds be elevated.

in allusion to the problems found in this audit, the CNAO suggested that the China Meteorological Administration should further strengthen the management of the departmental budget management, normalize the preparation, authorization and feedback of budget, and strictly execute the state regulations on budget and the financial system. The China Meteorological Administration should use funds conscientiously according to the purposes prescribed in the budget, never expand the scope of expenditure on its own, elevate the spending standards or transfer them for other purposes. The CNAO also suggested that the China Meteorological Administration should urge all the affiliated entities to improve the financial management, normalize the bookkeeping operation, and, in regard to the incomes and expenses that should be listed in the budget for management, incorporate them into the budget strictly according to the relevant provisions.

4. Rectification in addressing the problems found in the audit

The China Meteorological Administration conducted self-examination before this audit and rectified part of the problems that arose in the self-examination. With regard to the problems in this audit, the China Meteorological Administration has attached great importance to them and earnestly studied measures for rectification and put the measures into effect in a down-to-earth manner. Concerning the problem of project funds that are beyond the permitted range, the funds have been recovered. Concerning the problem of self-approval of the adjustment of the project budget, the funds have been recalled to the source through the original channel. Concerning the problem of failing to incorporate the rental income of the affiliated State Satellite Meteorological Center into the budget, the Center has been demanded to recover the funds and incorporate them into the budget for management.  Concerning the problem of using the project funds beyond the permitted scope by part of the affiliated units, the units concerned have already adjusted the accounts and adopted measures to tighten the control over the budget in the course of carrying on projects and guarantee that no similar problems would occur in future. Concerning the low rate of materializing the expenditure for part of projects belonging to part of the affiliated units, measures of superintendence have been adopted to expedite the progress in executing the budget for projects.

Furthermore, in respect of other problems such as the non-standardized management found in the audit, the CNAO has issued a separate letter of audit proposals, and the China Meteorological Administration has carried out rectification accordingly. 

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Banking Regulatory Commission

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, during January-February 2008, on the budget implementation of the China Banking Regulatory Commission (hereinafter abbreviated to CBRC) for 2007 and other financial revenues and expenditures and a test audit for 12 of its affiliated units.

1. Background

The CBRC is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Commission at its own budgetary level, the budgets of 36 second-level budgetary units and the budgets of 296 third-level budgetary units.

The audit findings showed that the revenue and expenditure of budget of the CBRC for 2007basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations of the state, and the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems. The CBRC was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, continuously improve the internal control system, further strengthen the budgetary control and financial supervision of the detached offices, and earnestly resolve the problems found in the audits of the preceding years. However, it was also found in the audit that there were some problems needing resolution and rectification.

2. Main problems found in the audit

(1) Part of the affiliated units spent 1,266,400 yuan exceeding the permitted scope of expenditure.

In 2007, seven banking regulatory bureaus including those in Xinjiang and Zhejiang disbursed human resource costs under the item of public-use funds, and there was a problem of mutual squeezing between the project expenditure and the public expenditure. A sum of 1,266,400 yuan was involved in those cases.

(2) The affiliated Fujian Banking Regulatory Bureau listed the income less than the stipulated amount by 1,250,000 yuan.

From 2005 to 2007, the Fujian Banking Regulatory Bureau received a reward payment totaling 1,250,000 yuan transferred by the Department of Finance of Fujian Province and the Bureau of Finance of Fuzhou City which was not accounted as an income.

Furthermore, some of the affiliated units had the problems of non-standardized management of fixed assets and non-standardized bookkeeping operation.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely issued an audit report and released a statement of audit decisions to CBRC. Concerning the problems of expanding the scope of expenditure, increasing the spending standards and underreporting the incomes by some of the affiliated units, the problems was demanded to be resolved and account items were required to be adjusted.  Concerning the problem of the non-standardized management of fixed assets and bookkeeping operation, it demanded that the management should be strengthened and the problems should be rectified in strict compliance with the relevant provisions.

In the light of the problems found in the audit, the CNAO suggested that the China Banking Regulatory Commission should further standardize budgetary expenditures, intensify the management of the public-use expenses and the project expenses, and strengthen the management of the fixed assets. At the mean time, CBRC should consult with the Ministry of Finance to resolve the problem of 410 million yuan for personal services in excess of budget found in the self-examination as soon as possible.

4. Rectification in addressing the problems found in the audit

The China Banking Regulatory Commission conducted self-examination before this auditing, and rectified part of the problems that arose in the course of self-examination. With regard to the problems found in this audit, the China Banking Regulatory Commission has attached great importance to them and made arrangements for rectification immediately after the completion of the audit, and resolution and rectification were underway in an earnest manner. Concerning the problem of range expansion in expenditure, increasing the spending standards and understating the incomes, criticisms have been made in official dispatches, instructions have been issued for immediate resolution, and adjustments have been made in the account books. Concerning the problem of the non-standardized management of fixed Assets and bookkeeping operation, rectification has been taken. At the same time, in connection with the rectification, work has begun to find out the inadequacies and weak chains existing in the financial management; and the rectification has been included in the scope of work assessment so as to establish and improve the related systems including the system of discharging duties and assuming responsibilities.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Securities Regulatory Commission

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, during January-February 2008, on the budget implementation of the China Securities Regulatory Commission (hereinafter abbreviated to CSRC) for 2007 and other financial revenues and expenditures, and a test audit for 13 of its affiliated units.

1. Background

The China Securities Regulatory Commission is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the CSRC at its own budgetary level and the budgets of 36 second-level budgetary units.

The audit findings showed that the revenue and expenditure of the budget of the CSRC for 2007 basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations of the state, and the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems. The CSRC was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further strengthen the management of the budget and financial affairs, and establish and improve the related systems, and earnestly resolve the problems found in the auditing of the previous years. But however, in this audit there were also some problems that need resolution and rectification.

2. Main problems found in the auditing

(1) A total of 19,156,100 yuan was disbursed for extra budgetary personnel services fees.

In 2007, the China Securities Regulatory Commission and 12 of its affiliated units assumed such forms as placing other receivables on account, squeezing public-use expenses and drawing on the balance from the previous years, to spend 19.1561 million yuan on extra budgetary personal services fees.

(2) A total sum of 1,307,200 yuan was expended by exceeding the scope of expenditure or raising expenditure standards.

In 2007, the CSRC at its own budgetary level entered more labor union expenditure by 778,000 yuan. The affiliated Xinjiang Securities Regulatory Bureau and Fujian Securities Regulatory Bureau entered a total of 200,000 yuan of public-use expenses in the account of project expenditure. The affiliated Heilongjiang Securities Regulatory Bureau and Henan Securities Regulatory Bureau disbursed 329,100 yuan by raising spending standards to pay and lodge in the housing funds on the basis of accumulation.

(3) The affiliated Chongqing Securities Bureau understated the income by five million yuan.

In 2007, the Chongqing Securities Regulatory Bureau did not enter the funds of five million yuan appropriated by the Bureau of Finance of Yuchong District of Chongqing Municipality as an income for accounting.

(4) The expense of 4,127,000 yuan of the capital construction special funds by the affiliated Zhejiang Securities Regulatory Bureau was non-compliant.

In 2007, the Zhejiang Securities Regulatory Bureau drew on 4,127,000 yuan of the capital construction special funds to pay the office building rental, the property service charge, etc. beyond the set standards.

Furthermore, in the Securities Regulatory Commission and part of its affiliated units, there existed the non-standardization problems in such aspects as the purchase of fixed assets, the collection of regulatory charge and penalties, the use of special funds and the reporting of the standards for allowances and subsidies of the previous years.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely issued an audit report and released a statement of audit decisions to CSRC. As to the problem of disbursing extra budgetary personal service fees, it was required that the budget reply should be strictly executed. Regarding the problems of expanding the scope of expenditure, raising the spending standards or understating the income, it called for immediate rectification and readjustment. Concerning the problem of drawing on the capital construction special funds to pay the office building rental and property services charge beyond the stipulated standards, it called for the instruction issued to the units concerned to make corrections. As to the problem of non-standardized management existing in such aspects as the purchase of fixed assets, the collection of the regulatory charge and penalties, the use of special funds or the reporting to a higher authority about the standards for allowances and subsidies of the previous years, it called for the management to be improved and rectification to be carried out in strict accordance with the relevant provisions.

In the light of the problems found in the audit, the CNAO suggested that the Securities Regulatory Commission should intensify institutional bindings, normalize budgetary expenses, clean up remnant funds, normalize bookkeeping operation, improve and strengthen institutions and enhance the effects in law enforcement.

4. Rectification in addressing the problems found in the audit

The China Securities Regulatory Commission conducted self-examination before this audit, and resolved part of the problems found in the self-examination. With regard to the problems arising in this audit, the China Securities Regulatory Commission has attached great importance to them, thus a meeting was convened to discuss the special topics on rectification with the audit opinions taken into account, and the relevant departments and detached offices were required to implement the audit decisions and strictly carry out rectification conscientiously. Concerning the problem of disbursing extra budgetary personnel services fees, the relevant circumstances have been reported to the Ministry of Finance. Concerning of the problems of expanding the scope of expenditure, raising the spending standards or understating the incomes, the relevant units have adjusted the accounts and the spending standards. Concerning the problem of drawing on the capital construction special funds by part of the affiliated units to pay the office building rental and the property service charge in excess of the standards, the relevant units have started rectification. Concerning the problem of non-standardized management in terms of the purchase of fixed assets, the collection of regulatory charges and penalties, the use of special funds and the reporting a higher authority about the standards for allowances and subsidies, measures for rectification have been worked out.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Insurance Regulatory Commission

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, during January-February 2008, for the budget implementation of the China Insurance Regulatory Commission (hereinafter abbreviated to CIRC) for 2007 and other financial revenues and expenditures and a test audit for 11 of its affiliated units.

1. Background

The China Insurance Regulatory Commission is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Commission at its own budgetary level and the budgets of 35 second-level budgetary units.

The audit findings showed that the revenue and expenditure of the budget of the CIRC for 2007 basically conformed to the provisions of the relevant budgetary, financial and economic laws and regulations of the state, and the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems. CIRC was able to do a good job of the organizational work for the compilation and presentation of the budget of its own department, further improve the internal control system, set up the reward and punishment mechanism in financial accounting, and carry out rectification in earnest by addressing the problems found in the audit of the previous years. But however, it was also found in the audit that there were some problems that need resolution and rectification.

2. Main problems found in the audit

(1) A total of 29,833,600 yuan was spent for extra budgetary personal services fees.

In 2007, the CIRC and its 35 affiliated units disbursed 29,833,600 yuan for extra budgetary personal services by using such methods as placing it on account under the running account.

(2) The scope of expenditure was expanded to 3,114,900 yuan.

In 2007, the CIRC and four affiliated units expanded the scope of expenditure to a total of 3,114,900 yuan as personnel services under welfare expenses.

(3) The affiliated Heilongjiang Insurance Bureau lodged funds amounting to 4,289,300 yuan off-balance-sheet account.

In 2007, the Heilongjiang Insurance Regulatory Bureau lodged into an individual saving account, a cumulative total of 4,289,300 yuan of the income taken from examination fees that should be turned over to the treasury, and by the end of 2007, an amount of 612,700 yuan was not yet turned over into the special treasury account.

(4) The affiliated Fujian Insurance Regulatory Bureau entered more expenses than the permitted amount by 130,400 yuan.

From 2005 to 2007, the Fujian Insurance Regulatory Bureau entrusted the Insurance Industry Association to organize an examination for insurance agencies. But it overpaid the expense on examination fees by 130,400 yuan to the Association without effective verification.

Moreover, there was a problem of non-standardization in part of the units affiliated to the CIRC such as using the funds for investigations and handling cases to buy computers and failing to pass part of the fixed assets through the accounts.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely issued the audit report and released a statement of audit decisions to CIRC. Concerning the problems of paying extra-budgetary personal services fees, expanding the scope of expenditure or increasing the spending standards, it called for immediate correction and adjustment of the relevant account. Concerning the problems of lodging funds out of accounts or entering more expenses, it called for correction and recovery of the sums of money. Concerning the problems of non-standardization such as using the funds for investigations and handling cases to buy computers and failing to enter part of the fixed assets into accounts, it called for the management to be improved and the problems to be solved in strict accordance with the relevant provisions.

In the light of the problems found in the audit, the CNAO suggested that the CIRC should further standardize the expenses for personnel service fees, use funds in accordance with specific purposes and ranges, and elevate the normative nature of the bookkeeping operation; and further improve the management of and supervision over the incomes and expenses concerning the examination for insurance middlemen.

4. Rectification in addressing the problems found in the audit

The CIRC conducted self-examination before this audit and resolved some problems found in the self-examination. CIRC paid great attention to the problems found in this audit, , organized the relevant departments and the affiliated units to find out the causes, studied and worked out feasible and effective measures for rectification and carry out correction and rectification conscientiously. Concerning the problem of disbursement for extra budgetary personnel service fees, the relevant circumstances have been submitted to the Ministry of Finance.  Concerning the problems of expanding the scope of expenditure or increasing the spending standards, it has been made clear as to the whole set-up that has listed the channels for disbursing funds going to personnel services, public-use expenses and project expenses and the standards of giving various allowances and subsidies and year-end bonuses. Concerning the problem of the lodging of funds off the account book, an instruction has been given to the affiliated units immediately to turn over the full sum of the examination fees to the special treasury account and to formulate the Measures for the Management of Collection and Turning-over of the Application Fee in the Examination for Qualification as Agencies. Concerning the problem of overpaying the expense, an instruction has been given to relevant units to renew the calculation of cost prices of the unit for organizing the examination and adjust the standards for paying funds according to facts within the limits of the provisions. Concerning the problem of non-standardization such as the funds for investigations and to buy computers, and the problem involving the failure to enter part of the fixed assets into accounts, measures for rectification have been formulated.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

National Natural Science Foundation

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to March 2008, for the performance of the budget of the State Natural Science Foundation (hereinafter abbreviated to SNSF) for 2007 and other financial revenues and expenditures and a test audit for three affiliated units.

1. Background

The SNSF is a first-class budgetary unit in the central finance, and the departmental budget is the budget of the HSHF at its own budgetary level.

The findings of the audit showed that the revenue and expenditure of the budget of the NSNF for 2007 basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations set by the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, that the SNSF was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further strengthen the management of the budget and financial affairs, set up or improve the relevant systems, and effect earnest rectification in addressing the problems found in the audit of the previous years. But however, it was also found that there were some problems need resolution and rectification.

2. Main problems found in the audit

(1) The compilation of the budget for the State Outstanding Youth Scientific Fund was unreasonable, with the remnant funds amounting to 338,505,000 yuan.

In compiling the departmental budget of the SNSF, the compilation of the budget for the project of the State Outstanding Youth Scientific Fund was unreasonable, leading to a considerably large balance. By the end of 2006, the accumulated balance of the funds amounted to 355,195,000 yuan.  The budget for expenditure for 2007 was 404,390,000 yuan, of which the financial appropriation was 349,200,000 yuan, and a sum of 55,190,000 yuan was drawn on from the balance of the preceding year. The actual expenditure was 365,890,000 yuan, and the year-end accumulated balance of the funds was 338,505,000 yuan.

(2) The income totaling 5,437,000 yuan turned over to the SNSF by the affiliated units was not managed in accordance with the principle of “two separate lines for revenue and expenditure”, and was not included the departmental budget.

From 2004 to 2007, the income totaling 5,437,000 yuan turned over to the SNSF by the affiliated units did not enter the special financial account, nor was it included in the departmental budget of the year. Of the total sum, 3,087,400 yuan was used directly by the Office Service Center for providing lunches to the staff and workers of the SNSF, 1,193,100 yuan was distributed to the operating fund and the employee welfare fund, and the remaining 1,156,500 yuan (the money was turned over by the affiliated units in 2007) was lodged in the book account of the SNSF that was not yet distributed.

(3) Capital construction funds were spent beyond the estimated budget by 2,059,500 yuan.

Up to the end of 2007, the SNSF spent 2,059,500 yuan on the housing removal expense for the project of expanding the assessment business building beyond the estimated budget.

(4) A total income of 59,817,100 yuan from the assessment charge, interest and the management fee of the associated fund were lodged.

Up to the end of 2007, the SNSF lodged the assessment income of 30,858,600 yuan, interest income of 13,326,400 yuan, and the management fee of the associated fund of 15,632,100 yuan, totaling 59,817,100 yuan. The above-mentioned lodged funds had not been incorporated into the budget for arranged uses.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. As to the problem of the unreasonable compilation of the budget for the project of the State Outstanding Youth Scientific Fund leading to a considerably large balance of funds, the CNAO urged that the budget be compiled scientifically and that the remnant funds be incorporated into the departmental budget and be used for financing projects of the State Outstanding Youth Scientific Fund. Concerning the problem of failing to exercise the management along “two separate lines for revenue and expenditure” for the revenues turned over by the affiliated units, it also urged that the Ministry of Finance be coordinated to formulate a specific method for channeling the revenues into the national treasury or a special financial account, and in future the relevant revenues that should be turned over to the national treasury or be a special financial account that should not be used for other purposes. As to the spending of the extra budgetary capital construction funds, the Administration called for an application to the State Development and Reform Commission for adjusting budget estimate as soon as possible and a strict control over the standards for various expenses of the project construction funds. Concerning the problem of lodging the incomes taken from assessment charge, interest and the Associated Fund management fee, it called for the revenues to be incorporated into the departmental budget for a comprehensive arrangement, and be used, as provided, in the work of project assessment of the SNSF or in financing scientific research projects.

In the light of the problems found in the audit, the CNAO proposed that the SNSF further ascertain the budget law and the provisions about the budget compilation so as to make budget compilation more normative and scientific; further strengthen the function of organization and leadership in performing the budget and make sure to execute the budget conscientiously; further strengthen the management of the funds for financing projects, use funds strictly for approved purposes; positively digest the balance of the State Outstanding Youth Scientific Fund, comprehensively use the lodged revenues from the assessment charge and interest and give full play to the effects of using funds; and further maintain rigorous financial and economic discipline and rigidly enforce the management along “two separate lines for revenue and expenditure” so as to guarantee the security of the state financial funds.

4. Rectification in addressing the problems found in the audit

The SNSF has attached great importance to the problems found in this audit and organized the relevant departments to conduct earnest study and rectification in regard to the relevant problems.  As to the problem of unreasonable compilation of the budget for the State Outstanding Youth Scientific Fund and the considerably large balance of funds, the SNSF has held consultation with the Ministry of Finance and adopted positive measures in the first half of 2008 to digest part of the balance. Concerning the problem of failing to exercise the management of “two separate lines for revenue and expenditure” for the revenues turned over by the affiliated units, consultation is underway with the competent financial and economic departments to develop a method for solution. Concerning the problem of spending the extra budgetary capital construction funds, the SNSF has communicated with the relevant departments. Concerning the problem of lodging the revenues from the assessment charge, interest and the associated fund management fee, it is in the process of positive rectification.

Moreover, in respect of other problems such as the non-standardized management, the CNAO has written a separate letter of audit proposals, and the SNSF is adopting measures to carry out rectification accordingly.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

State Tobacco Monopoly Administration

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to March 2008, for the performance of the budget of the State Tobacco Monopoly Bureau (hereinafter abbreviated to STMB) for 2007 and other financial revenues and expenditures and a test audit for three of its affiliated units.

1. Background

The STMB is a first-class budgetary unit in the central finance, and the departmental budget entirely comprises project funds, involving financial appropriations and government funds – profits after tobacco business tax.

The findings of the audit showed that the revenue and expenditure of the budget of the STMB for 2007 basically conformed to the provisions of the relevant budgetary, financial and economic laws and regulations of the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, and that the STMB was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, that the internal control system was comparably sound and implemented fairly well, and that it was able to carry out rectification in earnest by addressing the problems found in the audit. However, it was also found in the audit that there were some problems that need resolution and rectification.

2. Main problems found in the audit    

(1) The affiliated China Tobacco Machinery Group Co, Ltd. (hereinafter abbreviated to CTMG) did not verify and write off the special appropriation for science and technology according to relevant provisions, with the result that the amount of the assets and paid-in surplus was understated by 21,790,000 yuan.

From 2000 to 2006, the STMB allocated the scientific research funds totaling 110,000,000 yuan from the government funds to the CTMG, which was in charge of the scientific research project, as a special appropriation for trial production of a high speed cigarette winder and a high speed cigarette packer.  In May 2006, the scientific research was checked and accepted, bringing about 72,510,000 yuan as assets for the tobacco machinery company after deducting an expense of 37,490,000 yuan payable for disbursement. In October 2007, the company did not totally transfer the increased assets and paid-in surplus -- the assets of the prototype machines valued at 72,510,000 yuan from the above-mentioned scientific research project, but only 50,720,000 yuan was transferred, understated the assets and paid-in surplus by 21,790,000 yuan.

(2) The affiliated Zhengzhou Tobacco Research Institute did not carry forward the balance funds of 910,000 yuan from the special funds for scientific research according to the relevant provisions.

In November 2007, the Zhengzhou Tobacco Research Institute affiliated to the Tobacco Bureau transferred to the item of paid-in surplus the balance of 910,000 yuan from scientific projects such as the topic of tobacco-growing technology and ecological environment arranged from government funds of the previous years, and did not carry forward the balance to be used continuously for scientific research projects for the next year according to the relevant provisions.

(3) The affiliated China Tobacco Machinery Technological Center Co., Ltd disbursed more management fee by 2,609,400 yuan from the special funds for science and technology in excess of the set standards.

From 2004 to 2005, the China Tobacco Machinery Technological Center Co., Ltd. undertook the research and design of the prototypes of high-speed cigarette winder and high-speed packer.  Among them, the actual payment for the management fee for the high-speed cigarette winder was 6,220,000 yuan, accounting for 12.44% of the total budget for the project funds, exceeding the proportion of 5% as provided for by the Tobacco Bureau and making more disbursement by 1,190,400 yuan; and the actual payment for the management fee for the high-speed cigarette packer was 8,165,200 yuan, accounting for 13,6% of the total budget for the project funds, and exceeding the proportion provided for in the above-mentioned provisions and costing more expenses by 1,419,000 yuan. In total, there was more disbursed by 2,609,400 yuan.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. Concerning the problem of failing to check and write off, as provided for, the special appropriation for the scientific and technological project, resulting in the understated assets and paid-in surplus, the CNAO called for the relevant account items to be adjusted so as to guarantee the integrity of the national assets. Concerning the problem of failing to carry forward the balance funds of the special scientific research project according to the relevant provisions, it called for the relevant account items to be adjusted, the funds to be recovered to the source through the original channel, and a specific fund for a specific purpose to be ensured. As to the problem of more disbursement of the management fee than the set standards in the special scientific and technological project, it called for the relevant account items to be adjusted and the relevant financial funds to be recovered.

In the light of the problems found in the audit, the CNAO proposed that the Tobacco Bureau strengthen the management of the use and spending of budget funds by the affiliated units, improve the method of financial accounting of special funds, safeguard the integrity of national assets and enhance the effectiveness of the use of budget funds.

4. Rectification in addressing the problems found in the audit

The Tobacco Bureau conducted self-examination conscientiously before this audit and resolved the problems found in self-examination. With regard to the problems found in this audit, the Tobacco Bureau has attached great importance to them and instructed the units concerned to bring about resolution and rectification in earnest. As to the problem of failing to check and write off the special appropriation for the scientific and technological project, causing the understated paid-in surplus, the relevant account items have been adjusted and the paid-in surplus has increased. Concerning the problem of failing to carry forward the remnant funds from the special scientific research project funds, the relevant account items adjusted and the funds have been returned through the original channel. In speaking of the problem of more disbursement of the management fee in excess of the set standards in the special scientific and technological funds, the funds have been recovered by the Tobacco Bureau and consultation with the Ministry of Finance was underway for the turning-over to the national treasury.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

State Oceanic Administration

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to March 2008, for the performance of the budget of the State Oceanic Administration for 2007 and other financial revenues and expenditures and a test audit for two of its affiliated units.

1. Background

The State Oceanic Administration is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Oceanic Administration at its own budgetary level and the budgets of 25 second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the State Oceanic Administration for 2007 basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations of the state, that the bookkeeping accounting operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, and that the Oceanic Administration was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further improve the management of the budget and financial affairs, set up a rather complete internal control system and basically put it into operation, and earnestly resolve the problems found in the audit of the previous years. However, it was also found in this audit that there were some problems that need resolution or rectification.

2. Main problems found in the audit

(1) Self-adjustment of project budgets by 41,650,000 yuan.

In March 2007, the State Oceanic Administration made self-adjustment of project budgets such as “a comprehensive investigation and appraisal of our country’s off-shore ocean” by 4,150,000 yuan.  In December, it made self-adjustment of the budget involving 37,500,000 yuan from the special energy saving, and exhausted reduction funds in the additional budget allocation of the Oceanic Administration.

(2) Failing to use 5,455,200 yuan from the project funds for set purposes.

In September 2007, the State Oceanic Administration disbursed 4,500,000 yuan as commendation prizes for such units as the Guangdong Sea Fishery Bureau from project funds including “the operational expenses for the observation system of maritime stations and volunteer ships” and “the operational expenses for ships and airplanes for marine monitoring”.

In 2007, The organ of the State Oceanic Administration paid 555,200 yuan as expenses of the organ’s day-to-day office work and communications from the project funds for “Baixian demonstration project on the use and management of the sea area”, and allocated 400,000 yuan to the organ’s trade union from the funds of the project of “regular sovereignty preservation, cruises and law enforcement for the oil and gas resources of the East China Sea”, and the sum of money was used for organizing trade union activities.

(3) Compiling and presenting budgets for projects without conditions for execution, resulting in 14,200,000 yuan of budget funds becoming idle.

From 2004 to 2007, the Oceanic Administration compiled and presented an annual budget for the project of “the system of supporting policy decisions as an emergency response to the recurrence of unexpected events in focal sea areas of China”. Because the operational building for the emergency command center as a supporting unit for the project did not commence work of construction before December 2007, the project could not have been put into execution since then. From 2005 to 2007, the State Oceanic Administration approved budget funds of 14,200,000 yuan to the Beijing Educational Training Center, one of the undertakers for the project. Up to the time for audit, the funds had not been used, causing the budget funds to become idle.

(4) Fixed assets understated by 4,093,000 yuan.

In 1994, the China Antarctic Research Committee (the predecessor of the Polar Region Research Office of the State Oceanic Administration) disbursed 7,182,000 yuan to buy a commodity building.  In 2001, the property right of that asset was registered under the name of the State Oceanic Administration, but had not been registered and incorporated into the fixed assets account.  In 2006, in making an inventory of the assets of the Administration, the Office Service Center of the State Oceanic Administration incorporated the property into the fixed assets account based on an assessment price of 3,089,000 yuan, thus understating the fixed assets by 4,093,000 yuan.

(5) The affiliated China Marine Monitoring Corps understated other revenues by 320,000 yuan.

In 2007, the China Marine Monitoring Corps received 320,000 yuan as cooperation money for the topic of “the plan of the state scientific and technological support in the eleventh Five-Year Plan period” of the State Maritime Environment Forecast Center. The sum of money was put under the item of other payables on account, and was not carried over to the item of other revenues by the end of the year.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the provisions of the laws and regulations of the state, wrote an audit report and released a statement of audit decisions to lower levels. In talking about the problem of self-adjustment of project budgets and failing to use project funds for set purposes, the Administration urged that if there was a real need for adjusting budget items, it should be submitted to the Ministry of Finance for its approval before starting adjustment. As to the problem of compiling and presenting a budget for a project in case when the objective conditions are impossible for execution, resulting in budget funds becoming idle, the CNAO called for application for budget funds to be stopped, and the compilation and presentation of a budget to be resumed only when conditions were mature.

4. Rectification in addressing the problems found in the audit.

The State Oceanic Administration conducted self-examination before this audit and resolved part of the problems found in the self-examination. With regard to the problems found in this audit, the State Oceanic Administration has attached great importance to them and convened a special-topic meeting to announce the problems found in the audit, calling for various units to resolve the existing problems by adopting measures. In addressing the problems of self-adjustment of project budgets and failing to use the project funds according to set purposes, rectification has been made, ensuring that provisions on budget management would be strictly carried out in future. As to the problem of compiling and presenting project budget when the conditions for execution were impossible, resulting in budget funds becoming idle, relevant measures have been adopted to accelerate the construction of the business building serving as the emergency command center in a support to the project, and in the latter part of the year, the project funds would be paid and used continuously according to the contract. So far as the problem of understating the fixed assets is concerned, the item has been entered into the book retroactively in accordance with the relevant provisions. As to the problem of understating other revenues by the affiliated China Marine Monitoring Corps, the unit has adjusted the account items and entered the revenues into the account book.

Moreover, in respect to the problem of other problems including the non-standardized management, the CNAO has written a separate letter of audit suggestion. The State Oceanic Administration has conducted rectification accordingly.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

State Post Bureau

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from January to March 2008, for the performance of the budget of the State Post Bureau for 2007 and other financial revenues and expenditures and a test audit of four of its affiliated units.

1. Background

The State Post Bureau is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Bureau at its own budgetary level and the budgets of 31 second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the State Post Bureau for 2007 basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations of the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, and that the Bureau was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further improve the management of the budget and financial affairs, set up and improve the internal control system and put it into effective operation. But however, it was also found in the audit that there were some problems that need resolution and rectification.

2. Main problems found in the audit

(1) A sum of 1,836,400 yuan from the project funds was used by expanding the range of expenditure.

In 2007, without approval, the State Post Bureau changed the fund uses reaching an amount of 1,056,400 yuan taker from the funds for the project of “the post market supervision and management”, of which 700,000 yuan was expended for buying a software about the financial management system and 356,400 yuan was paid as the charge for the special line of information network station.  It changed the fund uses of 600,000 yuan from the funds for the project of “stamp topic and examination” and used the sum to pay the newspaper office of the People’s Posts and Telecommunications the charge in an attempt to make it a special issue on Post Business. In the project of “the revision and improvement of the laws and regulations on post supervision and management”, it disbursed 180,000 yuan as the funds for the formulation of “the program of the postal service in the eleventh Five-Year Plan period”, which should be disbursed from the funds for the project of “the development of trades in the eleventh Five-Year Plan period”.

(2) An inspection expense of 315,000 yuan for next year was spent in advance under the project funds for this year.

In December 2007, the State Post Bureau disbursed 315,000 yuan under the item of “inspection of postal articles and implements” as the expense for the product quality inspection of postal articles and implements for 2008.

(3) A sum of 200,000 yuan was disbursed fictitiously and used to pay the service charge in the affiliated Office Service Center,

In 2007, it was under the circumstances that the Office Service Center did not provide relevant services to the Bureau, which however allocated 200,000 yuan to the Center as service charge in December of the same year and disbursed it all together.

(4) Major problems existing in the affiliated Beijing Postal Management Bureau.

a. Part of incomes and expenses was accounted under current funds. In 2007, the Beijing Postal Management Bureau received a total 1,153,000 yuan as the funds for establishing “village-level post stations” allocated by the Beijing Rural Construction Office. Up to the end of the year, 1,068,000 yuan of the funds was spent, and the balance amounting to 85,000 yuan was placed under the clause “temporal money” for expenses and receipts.

b. The expenditure scope for basic expenses was expanded by 136,500 yuan. In 2007, in the budget for expenses of the State Post Bureau approved by the Ministry of Finance, no arrangement was made for the expense on housing reform.  But up to the year-end, the Beijing Postal Management Bureau disbursed 136,500 yuan as public accumulation funds for employees under the funds for basic expenses.

(5) Major problems existing in the affiliated Beijing Posts and Telecommunications Sanatorium.

a. The operating costs were fictitiously increased by 609.000 yuan. In December 2007, the sanatorium in its operating costs disbursed 609,000 yuan for purchasing guest-room facilities. But the payment for the goods was not yet made and the goods were still kept in the factory, thus bringing about a fictitious increase of the operating costs.

b. The additional endowment insurance for employees amounting to 178,000 yuan was disbursed under wages payable. Up to the end of 2007, the sanatorium disbursed a cumulative total of 178,000 yuan for additional endowment insurance under wages payable.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the state laws and regulations, timely wrote an audit report and released a statement of audit decisions to lower levels. In addressing the problems of using the project funds by the Post Bureau by expanding the expenditure scope, the advance disbursement of the inspection charge for next year drawn from the project funds for this year and the expansion of the spending scope for the basic expenses by the Beijing Postal Management Bureau, the CNAO urged that the relevant account items be adjusted, the budget approved by the Ministry of Finance be executed strictly in future, and adjustment, if there was a real need for it, be submitted for approval according to the set procedures. As to the problem of false disbursement of expenses for using it to pay service charge to the affiliated Office Service Center, the CNAO called for an immediate recovery of the service charge and adjustment of account items. As to the problems of adjusting part of incomes and expenses by the affiliated Beijing Postal Management Bureau with current funds and the fictitious increase of the operating costs by the affiliated Beijing Posts and Telecommunications Sanatorium and its disbursement for additional endowment insurance for employees under wages payable, the CNAO called for adjustment of the relevant account items.

4. Rectification in addressing problems found in the audit

The State Post Bureau conducted self-examination before this audit, and resolved the problems found in the self-examination. With regard to the problems found in this audit, the State Post Bureau has attached great importance to them, convened a meeting to announce them, released documents to lower levels on special topics to call for rectification and conducted special-item examination. Concerning the problem of using project funds by way of expanding expenditure scope the Bureau itself and the problem of expanding the expenditure scope of in basic expenses, the Post Bureau is consulting with the Ministry of Finance to discuss measures for rectification, indicating that the project budget would be itemized in future and the items to be adjusted would be submitted for approval in strict accordance with the set procedures. As to the advance disbursement of the inspection charge for next year under the project funds for this year, the relevant account items have been adjusted swiftly. As to the fictitious disbursement used for paying service charge to the affiliated Office Service Center, the service charge has been recovered and the relevant account items adjusted. In addressing the problem of accounting part of the receipts and payments under the current funds by the Beijing Postal Management Bureau and the problem of fictitious increase of the operating costs by the affiliated Beijing Posts and Telecommunications Sanatorium and the disbursement for the additional endowment insurance for employees under wages payable, the Post Bureau has already adjusted the account items as required.

Moreover, in respect of other problems such as the non-standardized management found in the audit, the CNAO has written a separate letter of audit proposals, and the State Post Bureau has made rectification accordingly.

Audit Findings on 2007 Budget Implementation and Other

Financial Revenues and Expenditures of the State

Council Leading Group Office of Poverty

Alleviation and Development

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to February 2008, for the performance of the budget of the Office of the Leading Group of the State Council for Aid-the-Poor Development (hereinafter abbreviated to OLGAD) for 2007 and other revenues and expenditures, and a test audit for its four affiliated units.

1. Background

The OLGAD is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the OLGAD at its own budgetary level and the budgets of four second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the OLGAD basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations of the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, and that the OLGAD was able to do good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, institute measures for the management of the budget and financial affairs and bookkeeping operation, gradually raise the level of the budget control and bookkeeping operation and earnestly resolve the problems found in the audit of the previous years.  However, it was also found in the audit that there were some problems that need resolution and rectification.

2. Main problems found in the audit

(1) A sum of 396,000 yuan drawn from the training subsidy funds was embezzled and used by granting subsidies to the staff of the Office.

In 2007, owing to the fact that the OLGAD had no source of income after the standardization allowances and subsidies, before the Ministry of Finance released the budget for allowances and subsidies, the OLGAD embezzled a sum of 396,200 yuan,-- an allowance allocated by the Organization Department of the CPC Central Committee for special-topic training of leading Party and government cadres in the poverty-stricken areas-- to make it the advance payment of allowances and subsidies to the staff of the Office.

(2) The affiliated China International Aid-the-Poor Center (hereinafter referred to as the “International Center”) repeated the application for the same training project and got financial funds amounting to 990,200 yuan .

In October 2005, the Ministry of Commerce entrusted the International Center to undertake the training project known as “international symposium on China’s experience in aiding the poor”, and the expense for training would be arranged by the Ministry of Commerce as a special item.  In November of the same year, the International Center took the above-mentioned project as a UNDP assistance project and applied to the China Center for International Technological Exchanges and got the project funds of 730,200 yuan on the basis of actual expenses. In June 2006,in consideration of the application of the International Center, the International Economic Cooperation Bureau of the Ministry of Commerce physically allocated the above-mentioned training expense amounting to 990,200 yuan to the International Center. By the end of 2006, the International Center changed this sum into the balance of the operating expenses, and distributed it.

(3) The OLGAD at its own budgetary level and part of its affiliated units expended 1,472,900 yuan out of the spending range.

From 2006 to 2007, the OLGAD disbursed 177,400 yuan as expenses for visiting foreign countries and traveling expenses under the item “expenses for public receptions in connection with foreign friends” and disbursed 53,000 yuan as personal services from the public-use funds. The affiliated China Aid-the-Poor Center disbursed 813,300 yuan as personal service and public-use funds drawn from the project funds. The affiliated International Center disbursed 374,800 yuan as personal services drawn from the public-use funds. The affiliated Foreign-financed Projects Management Center under the OLGAD disbursed 54,400 yuan as expenses for vehicle purchase tax and car decoration, etc. drawn from the project funds.

(4) From 2005 to 2007, the OLGAD apportioned the expenses for its staff to go abroad for training totaling 433,200 yuan among the affiliated centers for training cadres in poverty-stricken areas throughout the country (hereinafter called “training centers” for short).

(5) Both at the end of 2005 and 2006, the International Center, in compiling and presenting departmental budgets for 2006 and 2007, stated more employees on payroll by 14 and 12 persons respectively, and got more financial funds by 300,300 yuan and 453,400 yuan respectively, totaling 753,700 yuan.

(6) The management of topic research programs was not standardized.

From 2006 to 2007, the OLGAD entrusted a certain economic consulting center in Beijing to undertake the research on three topics, the amount of money involved in the contract totaled 600,000 yuan and the money was paid according to the contract. It was found in an extended audit that the center was a private enterprise of exclusive ownership, established with registered capital of 100,000 yuan, taking economic and trade consultancy as its principal business. Since its establishment in January 2006, the center had not conducted any business except for the research on topics entrusted by the OLGAD. The accounting information for 2006 provided by the center showed that the income from the above-mentioned research expense was 400,000 yuan and the expenses totaled 478,000 yuan. Included in the expenses were: three kinds of expenses totaling 250,000 yuan in cash were paid in the names of research expense and service charge, one expense of 72,800 yuan for the outlay for communication expense, reception expense and office expense (the attached original documents were bills in 2004, 2005 and 2007), and one expense of 35,500 yuan for holding a small scale forum (no original bills for payments were attached). It was difficult for auditors to verify the truthfulness of the expenses. The center did not provide the accounting information in 2007 at all.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the provisions of the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. As to the problem of embezzling the allowance for training allocated by the Organization Department of the CPC Central Committee and giving it as allowances to the OLGAD staff, the CNAO urged that the relevant account items be adjusted, and the additional allowances and subsidies in the budget be used to pay back the allowance for training allocated by the Organization Department of the CPC Central Committee. As to the problem of repeating application for the same project to get financial funds, it urged that the relevant account items be adjusted and the financial funds derived from it be used continuously for the project of the Ministry of Commerce in training staff with foreign aid. In addressing the problem of expenses of the OLGAD at its own budgetary level and part of the affiliated units exceeding the sets cope of expenditure, the CNAO called for strict execution of the approved budget in future. In face of the problem of apportionment of the expenses for training abroad among the training centers, it urged that apportionment of any expenses be no longer arranged among affiliated units. As to the problem of reporting more employees on payroll by the International Center in compiling and presenting the departmental budget to get more financial funds, the International Center was required to compile budget according to facts in future and ensure the truthfulness of the budget. As to the problem of non-standardization in the management of any topic research project, the OLGAD was required to verify the expenses for the topic research project establish and improve the internal control system and the management of any topic research project.

In the light of the problems found in the audit, the CNAO proposed that the OLGAD conscientiously carry out the provisions about the management of the departmental budgets of the central authorities, compile the budget according to facts, strengthen the management of expenses of budget funds, make clear the relationships between the Office and the affiliated units in terms of responsibilities and powers, and straighten out the relationships between finance and financial affairs in institutional units.

4. Rectification in addressing problems found in the audit

The OLGAD conducted self-examination before this audit, and resolved a greater part of the problems found in self-examination. With regard to the problems found in this audit, the OLGAD has attached great importance to them, convened an executive meeting especially to discuss and arrange the work of rectification, and then had the relevant documents printed and distributed so as to put forward specific requirements for rectification and to ensure the effectiveness of resolution and rectification. Concerning the problem of embezzling the allowance for training allocated by the Organization Department of the CPC Central Committee and used it as allowances and subsidies for the staff of the Office itself, the OLGAD has agreed after consultation with the Ministry of Finance that the additional allowances and subsidies approved by the Ministry of Finance for 2007 be used to make up for the funds for training cadres in 2008. Concerning the problem of the repeated application for the same project in order to get financial funds, the International Center has adjusted the relevant accounts by taking the obtained financial funds as prepaid funds for foreign aid projects, which will be used to continue the project of the Ministry of Commerce for training foreign aid personnel. Concerning the problem of the expenses exceeding the set range by the OLGAD and its affiliated units, all those units have expressed their resolve to put an end to the recurrence of similar problems in future. Concerning the problem of stating more employees on payroll in the departmental budget compiled and presented by the International Center, the International Center has expressed its resolve it would apply for funds which should strictly be based on the actual number of the personnel. Concerning the problem of non-standardized management of the topic research project, the OLGAD has entrusted the Beijing Fang Cheng Accounting Firm Co., Ltd. to verify the expenses for topics paid by the unit undertaking the research on the topics which took place in 2006, and solve the problem, and disqualified the unit from making research on topics for 2007 ,which has not yet started so far, and will no longer entrust the unit to conduct research on topics in future. The OLGAD has studied and worked out relevant measures for managing the establishment and improvement of the internal control system so as to strengthen the internal management.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Federation of Literary and Art Circles

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from January to March 2008, for the performance of the budget of the China’s Federation of Literary and Art Circles (hereinafter called “China’s Literary Federation” for short) and other financial revenues and expenditures and a test audit for seven of its affiliated units.

1. Background

The China’s Literary Federation is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Federation at its own budgetary level and the budgets of 17 second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the China’s Literary Federation basically conformed to the relevant provisions of the budgetary, financial and economic laws and regulations set by the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, that the internal control system had been further improved and budget management and financial accounting upgraded had been gradually upgraded, and that the Federation was able conscientiously to resolve the problems found in the audit of the previous years. However, it was also found in the audit that there were some problems that need resolution and rectification.

2. Main problems found in the audit

(1) A sum of 9,900,000 yuan of the budget funds was not yet itemized to specific projects.

A budget of 9,900,000 yuan for the project of “talent cultivation program” of the Federation at its own budgetary level for 2007 approved by the Ministry of Finance was not yet itemized to specific projects. In fact, the project comprised such specific projects as “talent cultivation” (the budget was three million yuan), “bringing happiness to the basic levels” (the budget was 2,300,000 yuan) and “the program for protecting the rights and interests of the organ of China’s Literary Federation” (the budget was one million yuan).

(2) A disbursement of 2,372,900 yuan by the China’s Literary Federation and the affiliated art schools and China Art Journal by expanding the scope of expenditure for special funds.

a. In 2007, the China’s Literary Federation expended a total of 687,000 yuan by expanding the expenditure scope in such projects as “bringing happiness to the basic levels” and “the program for protecting the rights and interests”.

b. In 2007, the art schools under the China’s Literary Federation used 685,900 yuan from the special funds totaling 800,000 yuan drawn for purchase expense and training expense approved by the Ministry of Finance to pay personnel salaries and current expenses.

c. In 2007, the China Art Journal office used the one million yuan of special funds for “constructing art network” approved by the Ministry of Finance which, instead totally paid salaries and public accumulation fund for housing, etc.

(3) Embezzlement of special funds by 100,000 yuan.

In 2007, the China’s Literary Federation expended 100,000 yuan for a get-together of five publishing houses drawn from the special funds for “scrutinizing books”.

(4) The China’s Literary Federation and the affiliated Chinese Dramatists Association drew on the balance of the previous years totaling 8,651,500 yuan that had not been included in the budget.

a. In compiling and presenting the budget of the Federation at its own budgetary level, the China’s Literary Federation reported to draw on a sum of 140,000 yuan only from the balance of the previous years. But by the end of the year, it actually drew on 7,733,100 yuan of the balance of the previous years, understating the budget by 7,593,100 yuan.

b. The Chinese Dramatists Association drew on the balance of the previous years by 1,058,400 yuan, which had not been included in the budget of the same year.

(5) The affiliated Chinese Musician’s Association did not yet used the project funds of 400,000 yuan at all, resulting in the financial funds becoming idle.

In 2006, the Chinese Musician’s Association received funds for three projects including “the activity about eight honorable acts versus eight shameful acts”, totaling 400,000 yuan. But up to the end of 2007, the funds had not been used yet, and no arrangement had been made for the funds in the budget for 2008.

3. Audit Decisions and Recommendations

With regard to the aforesaid problems, the CNAO has prepared am auditing report and released an auditing decision in accordance with the provision of State laws and regulations. Where the budget funds failed to be included into specific items, the report calls for specifying the budget expenditure under detailed items and giving an account as to the unit which is to handle the budget fund and the specific item under which the fund is listed. In addressing the problem of the Federation and its affiliated units which had increased the scope of payments and the former diverting special funds for other purposes, the report calls for making readjustments to the accounts in problem as well as withdrawing the diverted funds. Concerning the problem of the Federation and the Chinese Dramatists Association using surplus of the previous years while failing to include them into the scope of budget compilation, the report calls for the inclusion of the surplus funds of the previous yeas that the Federation has intended to use into the scope of its budget compilation in keeping with relevant regulations. As to the problem of funds under specific items yet to be used by the Chinese Musicians Association resulting in financial funds becoming idle, the report calls for the inclusion of the surplus funds in the budget of the next year for use in a well-coordinated manner with a view to putting the funds into efficient use.

Given the findings through auditing, the CNAO recommends:

(1) It is necessary for the Chinese Federation of Literary and Art Circles to strengthen its management in budget compilation strive to make budget compilation of various items more scientific, and raise awareness of the binding force of the budget.

(2) It is essential to beef up supervision and management of the financial work of the units under its administration in an endeavor to raise their awareness of abiding by related state financial laws and regulations.

(3) It is imperative to boost training of financial staff who are to be imbued with a sense of managing financial matters according to law, so as to do a good job in accounting assessment and financial supervision.

4. Rectification in addressing problems found in the audit

Prior to the auditing, the Chinese Federation of Literacy and Ant Circles, through a self-examination, had corrected a part of the problems discovered through the self-examination. Attaching great importance to these problems, the Federation had called several meetings to work out rectification measures and ways to implement them. It made an explicit demand that in future expenditure budgets be listed under various detailed items and that budget funds must be specified as to which unit is to handle them and the items under which the funds are listed. With regard to the problem of the Federation and its affiliated units expanding the scope of expenditure and the former diverting special funds in violation of relevant regulations, an adjustment has been made to the accounts in problem and had the diverted fund withdrawn. Concerning the problem of the Federation and the Chinese Dramatists Association using the surplus funds of the previous years while failing to include them into the scope of budget compilation, it made an explicit demand that in future while compiling budgets the surplus funds of the previous years that the department intended to use are to be included into the scope of its budget compilation. As to the problem of funds under specific items yet to be used by the Chinese Musicians Association resulting in financial funds left idle, an explicit demand was made that the surplus funds were to be included into the budget of the next year for use in a well-coordinated manner.

In addition, in relation other problems discovered though auditing concerning management that was fund deficient in standards, the CNAO had made recommendations in a letter, and the Chinese Federation of Literary and Art Circles had made rectifications in this regard.

               Audit Findings on 2007 Budget Implementation and Other

Financial Revenues and Expenditures of the

Chinese People’s Association for Friendship with

Foreign Countries

In keeping with the provision of the “Auditing Law of the People’s Republic of China”, the National Audit Office (CNAO), from December 2007 to March 2008, carried out auditing of the Chinese People’s Association for Friendship with Foreign Countries (hereafter referred to as the Friendship Association) on its budget implementation and other financial revenue and expenditure situation in 2007. The Administration also carried out random auditing on one affiliated class two budgetary unit and ten affiliated non-budgetary units.

1. Background  

     

The Friendship Association is a class one budgetary unit of the central finance. Its budget is made up of the Association itself and a class two budgetary unit.

The auditing findings show that the Friendship Association’s 2007 budgetary revenues and expenditures are largely in conformity with the national regulations relating to budget and financial laws. The account control is in the main in keeping with the accounting law, the relevant accounting conventions and provisions of the accounting systems. The Association has made an earnest effort in organizing the work for compiling its budget and intensifying the management on budget and financial matters; it has worked hard to improve relevant regulations and earnestly address various problems discovered in previous years through auditing by taking corrective measures. However, a number of problems calling for corrections and improvements have also been found through auditing.

2. Main problems found in the audit

(1) Misappropriation of funds by 2.3091 million yuan

As approved by the Ministry of Finance, in 2007 the Friendship Association was entitled to earmark 400,000 yuan for “special funds on Latin America and countries there which have no diplomatic relations with China”, 1.2 million yuan for “high-level forum on cooperation of local governments between China and France” and 100,000 yuan for “funds of the Friendship Association between China and the Arab countries, totaling 1.7 million yuan. By the end of 2007, the actual expenditures under the aforesaid items were 1.3897 million, 2.1812 million and 438,200 yuan, reaching a total of 4.0091 million yuan. This amount exceeded the budget by 2.3091 million yuan with the exceeding rate of 135.83%, which disrupted the normal operation of other budget items”.

(2) The channeling of 375,300 yuan of its affiliated non-budget unit into public expenditure of the Friendship Association.

The Federation of Chinese cities for Friendly Relations with Other Cities of the World (hereafter referred to as the Federation of Friendly Cities ) is a non-budgetary social organization with the status of a legal person and its funds mainly come from dues of the membership cities and social circles both at home and abroad. In 2007, as there was a surplus fund in the Federation of Friendly Cities, the Friendship Association channeled the Farmer’s council fee of 375,300 yuan into its public fund item.

(3) Membership dues collected by the Federation of Friendly Cities have not been registered for file as required, with the receipts failing to meet the required standards.

From 2003 to 2007, the Federation of Friendly Cities, in collecting dues from the membership cities, neither registered with the Ministry of Civil Affairs for file, nor used “receipts for membership dues of social organizations”.

(4) Cash dealings totaling 9.1138 million yuan among the affiliated service centers were made on the basis of credits over an extended period of time.

By the end of 2007, it was found that these was no timely cleaning-up in the following cases of funds: The 3 million yuan balance of the previous years of the affiliated Min You Business Service Center as recorded under the item of “other cashes due” is the financial account of the Friendship Federation’s Service Center, the 5.5 million yuan of balance of the previous years of the You You Commercial Service Center, that had been written off, the final revenue of 513,800 yuan transferred by the Friendship Association from the incoming and outgoing delegations, and the 100,000 yuan that had been returned following the closing-down of the cooperation shop of the non-staple food run under the China-Japan Commune in the 1980s.

3. Audit Decisions and Recommendations 

With regard to the aforesaid problems, the CNAO has prepared an auditing report and released an auditing decision in accordance with the provisions of State laws and regulations. Concerning the misappropriation of funds among various items, the report calls for analyzing the case, finding out the cause of the problem so as to improve management of various budget items. Regarding the problem of the Friendship Association Channeling the funds of its affiliated non-budget unit into its public expenditure, the report calls for readjusting the accounts in problem. In relation to the problem of the affiliated Federation of Friendly Cities failing to register for file as required in collecting membership dues with the receipts failing to meet the required standards, the report calls for intensifying management on membership dues and receipts on the part of the Federation of Friendly Cities. As for the problem of the affiliated Service Centers carrying on cash dealings on credits over an extended period of time, the report calls for the clearing-up of accounts and taking corrective measures by making readjustments in accounts as required.

4. Rectification in addressing the problems found in the audit

Prior to the auditing, the Friendship Association, through a self-examination, had corrected the problems discovered through the self-examination. Attaching great importance to these problems, the Association had called special meetings to work out a solution, asking relevant units to take corrective measures and rectify the situation in real earnest. A rectification program had been made and corresponding corrective measures taken with regard to the problem of misappropriation of funds among various items and of affiliated service centers making cash dealings on the basis of credits over an extended period of time. Concerning the problem of channeling funds of affiliated non-budget unit into public expenditure of the Friendship Association, corrective measures had been taken by making readjustments in accounts. Regarding the problem of the affiliated Federation of Friendly Cities failing to register for file as required in collecting membership dues with the receipts failing to meet the required standards, the Federation had gone through the procedure of registration for file in the Ministry of Civil Affairs and begun using standard receipts.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Disabled Persons’ Federation

In keeping with the provision of the “Auditing Law of the People’s Republic of China”, the National Audit Office (CNAO), from December 2007 to March 2008, carried out auditing of the China Disabled Persons’ Federation (hereafter referred to as CDPF) on its budget implementation and other financial revenue and expenditure situation in 2007. It also carried out random auditing on 5 affiliated units.

1. Background

The CDPF is a class one budgetary unit of the central finance. Its budget is made up of the CDPF itself and 12 class two budgetary units.

The auditing results show that the CDPF’s 2007 budgetary revenues and expenditures are largely in conformity with the national regulations relating to budget and financial laws. The account control is in the main in keeping with the accounting law, the relevant accounting conventions and provisions of the accounting systems. The CDPF has made an earnest effort in organizing the work for compiling its budget and further intensifying the management on budget and financial matters. It has worked hard to set up and perfect internal control systems and earnestly address various problems discovered in previous years by taking corrective measures. However, a number of problems calling for corrections and improvements have also been found through auditing.

2. Main problems found in the audit

(1) Thanks to the unscientific way in which reports of projects were submitted, there was a balance of 529.9809 million yuan of funds for special projects.

Owing to the fact that the submission of reports and their approval had not been made in the light of the actual progress of the projects, resulting in the failure of budget arrangements on the projects in accordance with the scientific and rational principle and in order of priority, there was a cumulative balance of 529.9809 million yuan of funds of four special projects, i.e. the lottery public welfare-fund project which was beyond the CDPF budget (for rehabilitation, education, poverty-relief and sports), building projects for a comprehensive training base of sports in the interest of China’s disabled persons, the project of building a complex of a comprehensive nature for the China Research Center of Rehabilitation and the project of rehabilitation as envisaged in the eleventh Five Year Plan. Consequently, these financial funds were not put into efficient use.

(2) The 500,000 yuan management fee which the CDPF received from its affiliated company was not handed over to the financial special account; it was channeled into the CDPF’s financial accounts and its budget management.

In December 2007, the CDPF’s service center, on behalf of the CDPF, received 500,000 yuan of management fee from the Shenzhen Baihui Complex Property Management Company Ltd, which was listed into the account under “other revenues” and was turned into an institutional balance. The fund was not handed over to the CDPF’s financial special account and was channeled into its accounts and budget management.

(3) The 200,000 yuan business proceeds of the CDPF’s affiliated service center was not put into an unified accounting and management.

On January 30, 2007, in accordance with a service agreement signed between the aforesaid center and the China Welfare Fund for Disabled Persons (hereafter referred to as the Welfare Fund), the center, through rendering logistic services for the Welfare Fund, received 200,000 yuan of service charge. The center listed it into the financial account of its affiliated canteen instead of putting it into a unified accounting and management.

(4) The affiliated budget units directly listed 20.3939 million yuan as expenditures from the sum in excess of what was stipulated in the non-budgetary subsidized earnings without the approval of the financial department.

The following five budgetary units, i.e. the Center of Special Art Guidance, for China’s Disabled Persons the Agency for the China Disabled Persons’ journal, the Beijing Message Hospital, the Information Center of the China Disabled Persons and the CDPF Service Center affiliated to the China Disabled Persons’ Federation, without the approval of the Ministry of Finance, directly listed as expenditures from the sum in excess of what was stipulated in the non-budgetary subsidized earnings of 2007. The amount in excess of what was stipulated totaled 27.5662 million yuan and the amount directly listed as expenditures was 20.3939 million yuan.

(5) The Center of Special Art Guidance for China’s Disabled Persons affiliated to the CDPF applied 3.6 million yuan more budgetary expenditure than it was entitled to in rents for its offices in its submission reports.

The aforesaid Center shared the same office building with the China Research Center for the Rehabilitation of Deaf Children located in A No.8, Hui Xin Li of the Chao Yang District, Beijing (with the property right belonging to the latter). It used 45 rooms as offices on the third floor. From 2003 to 2007, the aforesaid Center, in compiling its annual budget, had applied for 720,000 yuan for rents of its offices in the expenditure budget. The total sum amounting to 3.6 million yuan in five years was approved by the Ministry of Finance. The center, being a class-two budgetary unit of the CDPF, used state-owned assets as its offices while still making budget for rents. This is tantamount to asking for more project expenditure than it is entitled to.

3. Audit Decisions and Recommendations

With regard to the aforesaid problems, the CNAO has prepared an auditing report and released an auditing decision in accordance with the provisions of State laws and regulations. Regarding the problem of balance of special project funds adversely affecting the efficiency of utilizing the financial funds, the report calls for a rational arrangement of the projects’ expenditure budget and the implementation of the budget at an earliest possible time. On the problem of failing to hand over the management fee of the affiliated company to the financial special account and channeled into the CDPF’s accounts and its budget management, the report calls for its handing over to the financial special account and channeled into the CDPF’s accounts and its budget management. The CDPF’s affiliated service center failed to put its business proceeds into a unified account and management, so the report calls for making readjustments in accounts and putting the business proceeds into a unified account and management. Concerning the problem of the affiliated budget unit directly listing funds as expenditures from the sum in excess of what was stipulated in the non-budgetary subsidized earnings without the approval of the financial department, the report calls for a truthful reporting of its earnings in compiling the budget and the use of the surplus earnings only with the approval of the Ministry of Finance. Regarding the problem of the Center of Special Art Guidance for China’s Disabled Persons affiliated to the CDPF applying for more expenditure than it was entitled to for rents of its offices, the report calls for redoubled efforts in budget compilation to ensure that it is scientific and truthful.

In light of the problems discovered through auditing, the CNAO recommends that the CDPF beef up management in its application, approval, implementation and examination of its project budgets, enhance the efficiency in utilizing the financial funds and intensify management and supervision of earnings beyond the budget so as to ensure that its budget is an integral whole.

4. Rectification in addressing the problems found in the audit

Prior to the auditing, the CDPF, through self-examination, had corrected the problems discovered through the self-examination. Attaching great importance to these problems, the CDPF had called meetings on special subjects to work out corrective and rectification measures in real earnest. On the problem of balance of special project funds adversely affecting the efficiency of utilizing the financial funds, measures have been taken to improve the method of budget compilation and arrange the projects’ expenditure budget in a rational way. On the problem of failing to hand over the management fee of the affiliated company to the financial special account, the aforesaid fee had been transferred from the affiliated service center to the CDPF accounts and handed over to the financial special account. Relating to the problem of the CDPF’s affiliated service center failing to put its business proceeds into unified accounting and management, the Center had been asked to readjust the accounting and channeled the business proceeds into revenue management. Concerning the problem of the affiliated budget unit directly listing funds as expenditure from the sum in excess of what was stipulated in the non-budgetary subsidized earnings without the approval of the financial department, the unit in problem had promised to improve its method of budget compilation, truthfully report its earnings and use the surplus earnings only with the approval of the Ministry of Finance. With regard to the problem of the Center of Special Art Guidance for China’s Disabled Persons affiliated to the CDPF applying for more expenditure than it was entitled to for rents of its offices, the Center had pledged to make readjustments when submitting a report for its budget of 2009.

In addition, in relation to other problems discovered through auditing concerning management that was found deficient in standards, the CNAO had made separate recommendations in a letter relating to auditing, and the CDPF had made rectifications in this regard.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China Council for Promotion of International Trade

In keeping with the provision of the “Auditing Law of the People’s Republic of China”, the National Audit Office (CNAO), from December 2007 to March 2008, carried out auditing of the China Council for the Promotion of International Trade (hereafter referred to as Trade Promotion Council) on its budget implementation and other financial revenue and expenditure situation in 2007. The Administration also carried out random auditing on four affiliated units.

1. Background

The Trade Promotion Council is a class one budgetary unit of the central finance. Its budget is made up of the Council itself and three class two budgetary units.

The auditing results show that the Trade Promotion Council’s 2007 budgetary revenues and expenditures are largely in conformity with the national regulations relating to budget and financial laws. The account control is in the main in keeping with the accounting law, the relevant accounting conventions and provisions of the accounting systems. The Council has made an earnest effort in organizing the work for compiling its budget, establishing and perfecting relevant regulations. It has worked hard to address various problems discovered in previous years and constantly intensify budget management and financial supervision and checks. However, a number of problems calling for corrections and improvements have also been discovered through auditing.

2. Main problems found in the audit

(1) Failure to channel 576.216 million yuan fund into budget management

From 2004 to 2007, the Trade Promotion Council had failed to send the 568.8976 million yuan of proceeds of its overseas investment enterprise with controlling shares back to China and channel it into the Council budget for unified management.

In 2007, the Trade Promotion Council used 6.0024 million yuan from the surplus fund of the previous year to make up for insufficient expenditures while failing to channel it into its annual budget.

In 2007, the Council failed to channel into its budgetary management that 316,000 yuan which was the fee in compensation for the dismantlement of its houses with property rights.

In the period of 2006-2007, on the part of the Administration Service China Council for the Promotion of International Trade (CCPIT), the rent of property right owned houses totaling RMB One million yuan had not been included in its budget management.

(2) The Affiliate of International Chamber of Commerce (ICC) had not legally registered yet as mass organization fees coming to as much as 13.2805 million yuan, which runs counter to the regulations set forth by the proper authorities.

The Affiliate of the International Chamber of Commerce was set up as mass organization in January of 1995, headed by CCPIT, but this unit had not officially registered with the proper authorities up to 2007; in 2003-2007 in the absence of either legal person’s registration certificate, organ code, tax registration certificate or permit for collecting fees, the aforesaid Affiliate on its own organized entrance examinations, enrolled staff members, conducted training courses and so on; all these activities charged for 13.2805 million yuan on the basis of accumulation.

(3) The Affiliate of Beijing Dongfang Huali Management Consulting Co., Ltd lent to other units its earnings of 37.7850 million yuan out of capital funds settlement of exchange; this act has violated the stipulation.

In the period of 2004-2007, the company twice breached the regulations set forth by the State Administration of Foreign Exchange; in light with the regulations, its earnings-37.7850 million yuan are required to be injected into the item of expenditures for regular productive operation in investment, but instead, the Affiliate lent all its money to China Commercial Property co., Ltd.

(4) The Affiliate of China International Economic and trade Arbitration Commission (CIETAC), in the name of “stabilizing development fees”, by applying for administrative operation fees obtained 2.50 million yuan, out of which 2.2604 million accounting for 90% of the budget were used to pay its staff members for their subsidies of salary nature, its retirees for their salaries and the workers and staff for their medical fees.

(5) The Affiliate--the Capital Management did not pay the house rent totalling1.4091 million which should be charged.

China Capital Management Co. is the subsidiary of the Dongfang Huali Investment (Hk) Holding Co., Ltd, which was set up and invested by CCPIT. In November of 2004, the Asset Management Center and China Capital Management Co. signed the contract on house renting; and it was agreed upon that the property right be taken as the houses of CCPIT and rent to China Capital Management Co. for use, with the rent tenure of three years and charge totalling1.4091 million yuan, but however the Center had never collected the rent at all at least up to 10 march, 2008.

(6) Without being submitted to the proper authorities for approval or going through the procedure as stipulated, the Guild of CCOIC had been changed in its system.

In between the period of 1995-2003, the Guild of CCOIC was set up by CCPIT with the funds—the earnings as well as the income totalling159.50 million yuan, which had been pooled from among its enterprises and institutions; it is the affiliate of an institutional nature under CCPIT which collects charge and expands it by the Guild itself. In 2007, without being subject to the Ministry of Finance for approval concerning the plan for system charge, the CCOIC and the Asia—Pacific Xuanhao Group Co., Ltd (APXG) completed the charge of the stockholding system of the Guild. And without authorization the CCPIT approved the agreement on the “system change”, which had been concluded and signed between its Administrative service center and Beijing Asia—Pacific Xuanhao Group Co., Ltd attached to APXG, and thus the houses of the Guild and their equipment had been demolished or expanded.               

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. In speaking of the problem of failing to incorporate the funds into budget management, it urged that the funds be incorporated into budget management according to the relevant provisions. In talking about the failure of the Affiliate of International Chamber of Commerce in China to register as a mass organization and the collection of examination fees in violation of rules, it urged that the Affiliate register with the competent department as a mass organization as soon as possible and stop the collection of fees until the attainment of the legal qualification for collecting fees. Concerning the problem of lending the funds derived from the exchange settlement of the capital funds by the affiliated Beijing Huali Company in violation of rules, it demanded that the China Council for the Promotion of International Trade instruct the enterprise to recover in full the money lent in violation of rules. Concerning the problem of the application by the affiliated China International Economic and Trade Arbitration Commission for deriving money from the project funds for government departments and state institutions in the name of “the stabilized development fee” to be used for giving subsidies, it calls for non-recurrence of similar problems in future. Concerning the problem of the failure of the affiliated Assets Management Center to collect the rental for the house lent out, it urged that the unit concerned collect the rental in full and timely. As to the problem of changing the system of the affiliated Guild of the China Chamber of International Commerce without reporting to higher authorities for approval, it calls for an immediate correction of the non-compliant act and an investigation into the responsibilities of the people concerned.

In the light of the problems found in the audit, the CNAO proposed that the China Council for the Promotion of International Trade further strengthen the work of formulating the budget and that the units and funds that should be included in the departmental budget be incorporated uniformly into the departmental budget management in strict accordance with the provisions of the budget law; that the Council attach importance to the effectiveness of using the balance funds in order to avoid the idleness and waste of financial funds; and that the Council intensify the financial supervision over the affiliated enterprises and institutions, and in regard to the questions of changing the systems of the affiliated enterprises and institutions and the handling of state-owned assets, and strictly abide by the relevant laws and regulations of the state in order to prevent the occurrence of drainage of incomes from the state -owned assets.

4. Rectification in addressing the problems found in the audit

The China Council for the Promotion of International Trade has conducted self-examination before the audit, and resolved the problems found in the self-examination. With regard to the problems found in this audit, the Council has convened a special meeting to clarify the tasks and responsibilities of different departments and called for earnest resolution and rectification.  Concerning the problem of failing to incorporate the funds into budget management, solution to the problem is under the way. Concerning the problem of failing to register as a mass organization and collecting fees in violation of rules, the unit concerned has been instructed to carry out rectification. In addressing the problem of lending the funds derived from exchange settlement of the capital funds by the affiliated Beijing Huali Company in violation of rules, the Council is being engaged in consultation with the relevant departments to work out measures for rectification. As to the problem of application by the affiliated China International Economic and Trade Arbitration Commission for deriving money from the project funds for government departments and state institutions in the name of “the stabilized development fee” to be used for giving subsidies, it is being engaged in consultation with the departments concerned to work out measures for rectification. In talking about the problem of failing to collect the rental for the house lent out by the affiliated Assets Management Center, a call letter has been sent out, and the Center will in the immediate future conclude a new house-lending agreement with the China Capital Management Company. Concerning the problem of changing the system of Guild of the affiliated China Chamber of International Commerce without reporting to higher authorities for approval, the Council has calls for the unit concerned to carry out immediate rectification.

Moreover, in respect of other problems such as the non-standardized management, the CNAO has written a separate letter of audit proposals, and the Council has carried out rectification accordingly.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

China International Publishing Group

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from December 2007 to March 2008, for the performance of the budget of the China Foreign Languages Publishing and Distribution Administration (hereinafter abbreviated to FLPDA) for 2007 and other revenues and expenditures and a test audit for nine of its affiliated units.

1. Background

The China Foreign Languages Publishing and Distribution Administration is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Administration at its own budgetary level and the budgets of 15 second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the FLPDA basically conformed to the provisions of the relevant budgetary, financial and economic laws and regulations of the state, that the bookkeeping operation basically conformed to the provisions of the accounting law, the relevant accounting principles and accounting systems, and that the FLPDA established or improved the relevant systems. However, it was also found in the audit that there were some problems that need resolution or improvement.

2. Main problems found in the audit

(1) The Administration underreported the income by 58,583,000 yuan

From 2002 to 2007, the FLPDA entered a total sum of 58,583,000 yuan in the accounts under “other accounts payable” or “accounts payable” rather than incomes, including an amount of 35 million yuan of the compensatory fund for construction given by the Beijing Polytechnical University and the Government Offices Administration of the State Council to the China International Books Trading Company affiliated to the FLPDA, the compensation fund of 13 million yuan for removing stacks affiliated to the FLPDA transmitted by the Beijing Foreign Languages Publishing House and a special fund of 10,830,000 yuan allocated by the International Communication Office of the CPC Central Committee, which gave rise to the inaccuracy in the final account.

(2) It adjusted on its own an amount of 7,306,500 yuan from the budget for the specific-item fund.

Without approval of the Ministry of Finance, the FLPDA adjusted on its own an amount of 7,306,500 yuan from the budget for specific-item fund for “subsidies to losses in publishing and distribution” and allocated the funds to ten second-level units affiliated to it.

(3) It expanded the scope of expenditure by disbursing 6,401,300 yuan of personal services under the public-use funds and specific-item funds.

The budget for personal services of the FLPDA at its own budgetary level as approved by the Ministry of Finance was 7,992,500 yuan, but the actual expenditure was 12,415,100 yuan, exceeding the budgeted expenditure by 4,422,600 yuan, that occupied public-use funds.

The FLPDA disbursed out of the range a sum of 1,176,000 yuan for adjusting wages in the affiliated second-level institutions from “the subsidies to the losses in publishing and distribution” and “the specific operational funds for publication and publicity for foreigners”.

A certain unit affiliated to the FLPDA disbursed a total 802,700 yuan from the special funds to pay staff wages, overtime bonuses and food expenses which were in excess of the set range for specific-item expenditure.

(4) Balance amounts of the funds for offshore institutions of part of the affiliated units totaling 4,286,100 yuan were not reflected in the accounts of finance of those units.

Up to the end of 2007, the balance amounts of the funds for offshore institutions of the periodical offices of Beijing Review, China Today and People’s Pictorial were US$27,600, US$431,900 and US$117,100, or 4,286,100 yuan in total by converting them into RMB, were not reflected in the accounts of finance of those three units.

(5) Part of the affiliated units understated the incomes by 14,688,000 yuan.

Up to the end of 2007, such units as the Information Center and Service Center of the China Internet received a total of 14,688,000 yuan of specific-item appropriations and various incomes, which were kept under the current accounts rather than incomes.

(6) The financial and accounting statements on the final account of the offshore enterprises of the affiliated companies were not presented.

The FLPDA and the China International Books Trading Company had jointly set up five offshore companies.  Up to the end of 2006, the total assets were 140,991,100 yuan.  Regarding this, the FLPDA did not present the financial and accounting statements on the final account of offshore enterprises.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. Concerning the problem of understating the incomes by the FLPDA at its own budgetary level, the CNAO calls for immediate adjustment of the accounts to make up the incomes. In speaking of the problem of adjusting on its own the budget for specific-item funds, the administration urged that the procedures of reporting budget adjustment to a higher authority for examination and approval be followed strictly in future. As to the problem of expanding the range of expenditure by disbursing the personal services expenses from the public-use funds and specific-item funds, it calls for strict execution of the budget in future. Concerning the problem of failing to reflect the balance amounts of the funds of offshore institutions of the periodical offices of Beijing Review, China Today and People’s Pictorial in the accounts of finance, it urged that the funds be incorporated into the accounts of finance of those three units for uniform accounting.  Concerning the problem of understating the incomes by such units as the Information Center and the Services Center of the affiliated China Internet, the relevant units were urged to adjust account items to make up the incomes. As to the problem of failing to reflect the assets of the affiliated offshore companies in presenting the financial and accounting statements on the final accounts of offshore enterprises, it urged that the financial and accounting statements on final accounts of offshore enterprises be presented and reported to the Ministry of Finance.

In the light of the problems found in the audit, the CNAO proposed that the FLPDA apply for, request for approval of and execute budgets for projects, and strengthen the supervision over the affiliated units.

4. Rectification in addressing the problems found in the audit

The FLPDA has conducted self-examination before the audit, and resolved the problems found in the self-examination. With regard to the problems found in this audit, the FLPDA has attached great importance to them and instructed the relevant units to make resolution and rectification more effectively and conscientiously in accordance with the audit opinions. Concerning the problem of underreporting the income by the FLPDA at its own budgetary level, the account items have been adjusted to make up the income. Concerning the problem of failing to reflect the balance amounts of the funds for offshore institutions of the affiliated Beijing Review, China Today and People’s Pictorial in the accounts of finance, the Administration made it clear that funds would be handled according to the set rules in future. Concerning the problem of understating the incomes by such units as the Information Center and Services Center of the affiliated China Internet, it has instructed them to carry the incomes to accounts fully and timely. As to the problem of failing to reflect the assets of the affiliated offshore companies in presenting the financial and accounting final statement, it has expressed its attitude that the relevant rules about the management of offshore assets would be strictly executed in future to make a good job of the management of offshore assets.

Moreover, in respect of the other problems such as the non-standardized management found in the audit, the CNAO has written a separate letter of audit proposals, and the FLPDA has carried out rectification.

Audit Findings on 2007 Budget Implementation and

Other Financial Revenues and Expenditures of the

Supreme People’s Procuratorate

In accordance with the Audit Law of the People’s Republic of China, the National Audit Office (CNAO) conducted an audit, from February to March 2008, for the performance of the budget of the Supreme People’s Procuratorate (hereinafter called the Supreme Procuratorate for short) for 2007 and other financial revenues and expenditures and a test audit for four affiliated units.

1. Background

The Supreme Procuratorate is a first-class budgetary unit in the central finance, and the departmental budget is composed of the budget of the Procuratorate at its own budgetary level and the budgets of four second-level budgetary units.

The findings of the audit showed that the revenue and expenditure of the budget of the Supreme Procuratorate for 2007 basically conformed to the provisions of the relevant budgetary, financial and economic laws and regulations of the state, that the bookkeeping operation basically conformed to the accounting law, the relevant accounting principles and accounting systems, and that the Supreme Procuratorate was able to do a good job of the organizational work conscientiously for the compilation and presentation of the budget of its own department, further strengthen the management of the budget and financial affairs, establish a fairly complete system of internal control and execute it effectively, work out a method for the management of some specific-item funds, actively promote the reform of departmental budget and the reform of the system of centralized payment by the treasury, further intensify the management and training of accounting personnel, and earnestly resolve the problems found in the audit of the previous year, with the rate of executing audit decisions reaching 100%. However, it was found in the audit that there were some problems that need resolution or improvement.

2. Main problems found in the audit

(1) A total of 13,675,300 yuan from the specific-item funds was embezzled, which was used to paying personal services and other expenses.

An amount of seven million yuan from the specific-item funds was embezzled to have paid personal services for retired cadres in the Supreme Procuratorate. An amount of 361,000 yuan from the administrative expenses (or other operating outlays) was embezzled for the expense for the maintenance of the Beidaihe Training Center of an affiliated institution. An amount of 829,000 yuan from the specific-item funds for exhaustive expenditure of means of transport and equipment and facilities was embezzled which served as rewards, and went to publicity expense. An amount of 1,103,300 yuan from the specific-item funds to maintain the operation of the information network system was embezzled in order to pay the expense of the rental of a private communication line. An amount of 4,382,000 yuan from the financial specific-item funds was embezzled so as to pay personal services in the Offices Service Center.

(2) The cumulative balance of the project funds for the Supreme Procuratorate and the affiliated State Procurators’ Institute reached 36,694,400 yuan.

Up to the end of 2007, the cumulative balance of the project funds of the Supreme Procutorate was 27,860,000 yuan. The cumulative balance of the project funds for the State Procurators’ Institute was 8,834,400 yuan. The above-mentioned balance funds totaling 36,694,400 yuan were not cleared timely, which was neither in conformity with the relevant rules of the state, nor was it able to give play to the effectiveness of the financial funds.

3. Audit Decisions and Recommendations

With regard to the above-mentioned problems, the CNAO, in accordance with the laws and regulations of the state, timely wrote an audit report and released a statement of audit decisions to lower levels. As to the problem of embezzling the specific-item funds, it urged that the budget be executed strictly in future and be placed under standardized management and that the awareness of budget constraint be intensified, so as to give full stop to embezzlement. In addressing the problem of the balance of specific-item funds of the Supreme Procuratorate, it called for the balance funds to be incorporated into the budget for the next year to make a comprehensive arrangement and to give realistic play to the effectiveness in using financial funds.

In the light of the problems found in the audit, the CNAO proposed that the Supreme Procuratorate further standardize the management and use of specific-item funds and that the progress in project implementation be expedited to give full play to the effectiveness of funds.

4. Rectification in addressing the problems found in the audit

The Supreme Procuratorate conducted self-examination before the audit. With regard to the problems found in this audit, the leadership of the Supreme Procuratorate has attached great importance to them and urged that the units concerned step up their efforts to adopt measures for earnest rectification. Concerning the problem of embezzling financial funds, it has announced that beginning from 2008, the budget be executed strictly so as to avoid a recurrence of similar problems. As to the problem of the balance amounts of the specific-item funds for the Supreme Procuratorate and the affiliated State Procurators’ Institute, the balance funds have been incorporated into the departmental budget of the Supreme Procuratorate for 2008 and a plan for using the funds has been worked out.

Moreover, in respect of other problems such as the non-standardized management found in the audit, the CNAO has written a separate letter of audit proposals and the Supreme Procuratorate is being engaged in making rectification actively.