Article 1    These Practice Directions are formulated in accordance with Article 24 of the Audit Law of the People's Republic of China for the purpose of standardizing auditing supervision over social securities funds and ensure the quality of such audit.

Article 2     The term "social securities funds" mentioned herein refers to funds for social securities managed by government departments and communities entrusted by government departments, which shall include funds for public insurance, relief, welfare as well as special care and allowances.

Article 3     The term "audit of social securities funds" mentioned herein refers to auditing supervision conducted by audit institutions over the  truthfulness, compliance and effectiveness of revenues and expenditures of social securities funds managed by government departments and communities entrusted by government departments.

Article 4     The objective of auditing social securities funds is to help guarantee the safety and completeness of social securities funds, promote the establishment and perfection of a modern social securities system in China, facilitate full achievement of the social and economic effects in utilizing social securities funds, ensure people's right to the basic living standard and maintain social stability.

Article 5    Audit institutions shall audit the following aspects of the budgetary implementation and final accounts of social securities funds:
(1) Whether approved budgets and financial plans for social securities funds are strictly implemented; whether there are revenues and expenditures in excess of the budgeted and planned ceilings;
(2) Whether adjustments to the budgets and financial plans are reviewed and approved in accordance with statutory procedures;
(3) Whether annual final accounts and financial reports and other relevant accounting statements, books and vouchers are true and regular and submitted to financial departments or competent superior departments for review and approval.

Article 6    Audit institutions shall audit the following aspects of the internal control systems for social securities funds:
(1) Whether there are sound and effective systems and regulations for financial management;
(2) Whether there are sound and effective financial and internal audit organizations;  whether these organizations may effectively perform their functions of controlling and supervising accounting treatments.

Article 7    Audit institutions shall audit the following aspects of the revenues and expenditures of public insurance funds:
(1) Whether organizations managing public insurance collect public insurance contributions in time and full according to the statutory items and standards; whether there are reductions, omissions as well as random mitigations and exemptions;
(2) Whether enterprises, undertakings, government departments, political parties and communities which should pay public insurance contributions have paid such contributions in time and full  according to the statutory items and rates; whether there are concealments, overdues, failure to pay the full amount, appropriations and unauthorized retainments;
(3) Whether competent authorities allocate public insurance funds according to the law in time and full; whether there are overdues, unauthorized retainments and appropriations;
(4) Whether expenditures on public insurance are included in budgets and plans according to relevant stipulations; whether allocation and utilization of adjusting funds are reasonable and in compliance with laws and regulations; whether scheduling of funds and plans for fund utilization are submitted to competent authorities for review and approval according to stipulated procedures and mandates;
(5) Whether organizations of public insurance pay benefits due to contributors according to the law timely, accurately and in the full amount; whether there are overdues or payments less than the due amounts;
(6) Whether agencies entrusted with the operation of public insurance funds satisfy statutory requirements; whether their credit ratings are reliable; whether public insurance funds are integrate and safe; whether value preservation and appreciation of public insurance funds comply with relevant laws and regulations; whether interests or other incomes and benefits thereof are included in revenues of public insurance funds; whether there are problems of appropriating public insurance funds for investment, trading activities and running enterprises;
(7) Whether there are acts in violation of the law such as embezzlement, illegal distribution and appropriation of  public insurance funds.
  
Article 8    Audit institutions shall audit the following aspects of the revenues and expenditures of organizations in charge of public insurance funds:
(1) Whether annual final accounts and financial reports as well as the related accounting statements, books and vouchers of such organizations are truthful and regular;
(2)Whether utilization of charges for management is in accordance with plans approved by financial departments;
(3) Whether there are unauthorized increase of the accrual basis and standards for management charges and expansion of expenditure scopes;
(4) Whether public insurance funds are used to make up for shortage of  administrative funds, undertake capital construction projects and purchase cars;
(5) Whether the establishment of agencies in charge of the operation of public insurance funds and their staffing are in accordance with the streamlining principles; whether administrative expenses are increased due to organization over-expansion and overstaffing.

Article 9    When auditing social securities funds intended for public relief, disaster subsidies, public welfare as well as special care and allowances, audit institutions shall examine the following major aspects:
(1) Whether appropriations from public finance and public donations and grants have been realized and made available according to budgets and plans; whether there is embezzlement of the proportions of monetary amounts or physical articles that are due to the eligible beneficiaries;
(2) Whether special funds are used for designated special purposes; whether social securities funds are encroached upon or appropriated;
(3) Whether there are acts in violation of the law such as embezzlement, illegal distribution, extravagance and waste;
(4) Whether utilization of social securities funds has achieved favorable social and economic effects.

Article 10    Audit institutions shall gradually make the audit of annual budgetary implementation and final accounts a regular and requisite practice and shall link such audit with audit of budgetary implementation of government departments at the corresponding levels.

Article 11    To audit social securities funds, audit institutions may practice the approaches of on-spot audit or auditing documents sent over by the audited bodies or a combination of the two.    Where necessary, audit institutions may also organize inter-sector audit, special audit or special audit investigations.

Article 12    Audit institutions shall conduct audit of social securities funds in accordance with stipulated audit procedures.  Where acts of revenues and expenditures are found in violation of relevant laws and regulations, measures of sanction or penalty should be metered out in accordance with relevant laws and regulations.  Material problems found in the audit should be reported to relevant governments or competent departments.

Article 13    Audit of social securities funds financed by social donations and grants shall be conducted with reference to the Practice Directions of Audit Institutions for Auditing Public Grants and Donations.

Article 14    The authority to interpret these Practice Directions rests with the CNAO.

Article 15    These Practice Directions shall come into effect as of January 1, 1997.