Article 1    These Practice Directions are formulated in accordance with the Audit Law of the People's Republic of China and the  Provisional Practice Directions for Auditing Central Budgetary Implementation stipulated by the State Council.

Article 2     The term "administrative funds" mentioned herein refers to funds for administrative expenses, revenues from fines and confiscation as well as administrative charges made by various state organs of power, executive organizations, judicial bodies, prosecution bodies, armed police force, various political parties, communities and organizations dispatched overseas.

Article 3     The term "audit of administrative funds" mentioned herein refers to auditing supervision conducted by audit institutions according to the law over the truthfulness, compliance and effectiveness of revenues and expenditures of administrative funds.    

Article 4    Audit of administrative funds shall be conducted for the purposes of ensuring the truthfulness, compliance and effectiveness of budgetary implementation and final accounts of administrative funds, improving management of administrative funds, reducing expenditure, promoting the building of clean and honest governments, upgrading administrative efficiency, and ensuring the exercise of state functions and fulfillment of tasks by various organizations and communities.

Article 5     When auditing revenues of administrative funds, audit institutions shall focus on the following aspects:
(1) Whether budgetary appropriations are posted to relevant fund accounts in time and deposited into the designated bank accounts in the required amounts;
(2) Whether item, standards and scopes of administrative charges are in compliance with relevant laws and regulations and submitted to financial departments and pricing authorities above the provincial level for review, approval and filing;  whether relevant receipts are in compliance with laws and regulations;  whether there are problems of random charging, irregular financing and arbitrary cost apportionment such as unauthorized increase of charging items, expansion of charging scopes and upgrading of charging standards;
(3) Whether proportions of revenues from fines and confiscation and administrative charges that should be turned over to financial departments or competent superior departments are made in time and full; whether there are concealments, evasions, overdues and unauthorized retainments of revenues;  whether there are problems of establishing extra accounts and unauthorized treasuries;
(4) Whether revenues to be matched with expenditures are posted into accounts in time and full and used to write down expenditures of funds according to relevant stipulations;
(5) Whether other sources of financing for administrative funds are true and regular;  whether there are problems of concealing sources of income and abusing administrative funds and special funds to make up for administrative expenditures.

Article 6     When auditing expenditures of administrative funds, audit institutions shall focus on the following aspects:
(1) Whether the approved budgets are strictly implemented, whether budgetary adjustments are made according to stipulated procedures and submitted for review and approval; whether there are expenditures exceeding budgeted and planned ceilings;
(2) Whether administrative funds that should be appropriated to organizations at lower levels are made in time and full;  whether there are unauthorized retainments, overdues, concealments and appropriations bypassing the requisite levels;
(3) Whether staff expenses are incurred according to the stipulated scopes and standards; whether there are problems of unauthorized upgrading of expense standards, expansion of expenditure scopes and payment of bonuses, allowances and subsidies in violation of relevant stipulations;
(4) Whether public funds are arranged according to overall consideration, expended as planned and utilized rationally; whether special funds are utilized strictly in accordance with the designated purposes and amounts;
(5) Whether there are problems of fraudulent reporting, reimbursement and  disclosure of expenditures, encroachment on and appropriation of administrative funds and transferring budgetary funds outside the budgets;
(6) Whether there are purchases of monopolized commodities without due authorization, interior decoration and furnishing of cars in excess of the stipulated standards or entertaining, gifting and traveling with the use of public funds;
(7) Whether various expenses of administrative funds have achieved favorable economic and social effects; whether there are wastes and losses.

Article 7     When auditing internal control systems for administrative funds, audit institutions shall focus on the following aspects:
(1) Whether there exist sound and effective systems of financial management and internal control; whether various expenditures are submitted for review and approval according to stipulated procedures and statutory mandates; whether financial organizations and internal audit systems are sound and effective;
(2) Whether annual final accounts, financial reports and relevant accounting statements, books and vouchers are true and regular and submitted for review and approval to financial departments or competent superior departments;
(3) Whether bank accounts are strictly managed according to relevant stipulations; whether there are problems of transferring funds from public finance into bank deposits or depositing public funds into private accounts; whether bank accounts are leased, lent or transferred;
(4) Whether cash, checks and negotiable securities are strictly managed according to stipulations; whether there are problems of cash in hand exceeding the imprest, reimbursing expenses with invalid receipts, expending cash revenues without proper accounting treatments and purchasing negotiable securities in violation of stipulations;
(5) Whether current accounts are true and regular and timely sorted out; whether there are protracted account balances of loss and encroachment on funds by other units or individuals; whether there are concealment of incomes, direct disclosure of incomes and expenses, random payment of bonuses and benefits-in-kinds and fraudulent claims of cash with the use of  current accounts as well as irregular outward investment and unauthorized borrowing and lending of funds.

Article 8     When auditing properties and assets acquired with the use of administrative funds, audit institutions shall focus on the following aspects:
(1) Whether there are tight and effective regulations and internal control systems for managing and controlling properties and assets; whether there are failures in posting fixed assets into relevant accounts, non-compliance of accounting treatments and inconsistency between accounts and physical existence of properties and assets;
(2) Whether purchases, receipts and deliveries, usage, waste reporting and scheduling, transfer and sales of properties and assets have undergone proper procedures; whether there are unauthorized purchases, waste reporting and scheduling, transfer and sale of public properties and assets; whether there are problems of neglected warehousing, losses and shortages as well as damages and wastes;;
(3) Whether there is free occupation of buildings, equipment, materials and other state assets where undertakings subordinate to the audited bodies operate their own enterprises;
(4) Whether profits from occupation and utilization of state assets are distributed according to relevant stipulations;  whether the proportions that ought to be turned over are turned over in time and full; whether the retained proportions are included in budgetary management or financial planning of the audited bodies.

Article 9   To audit administrative 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 10   Where their audit involves the issue of confidentiality, audit institutions and their auditors shall conduct audit according to relevant confidential requirements and shall be obliged to preserve confidentiality for state secrets acquainted in the course of audit.

Article 11   Audit institutions shall conduct audit in accordance with stipulated audit procedures.  Where acts of revenues and expenditures are found in violation of state laws and regulations, measures of sanction should be metered out in accordance with relevant laws and regulations.  For material problems found in auditing revenues and expenditures of administrative funds, serious research should be conducted while feasible opinions and recommendations for improvement should be made with special reports prepared for submission to governments at various levels or their competent departments.

Article 12    The authority to interpret these Practice Directions rests with the CNAO.

Article 13    These Practice Directions shall come into effect as of January 1, 1997.