By Li Jinhua
Auditor-General of National Audit Office of China
Vigorously launching performance audit is an important task set by the Programme for 2003 to2007 Regarding the Development of Audit Work. It is also a major move for audit offices to implement scientific outlook on development, to comprehensively perform their duties in accordance with law, and to vigorously push forward the building of resource-saving- type society. To do our best at our audit job will play a positive role in the promotion of raising the level of administering funds of public finance and increasing the value for the use of the funds and in pushing forward faster and better development of national economy.
In our practical economic life, except problems of violation of laws and regulations and of embezzlement and corruption, there is another problem worthy of note. That is one of low value for the use of funds and losses and wastes, as a result of faulty decisions and maladministration .This kind of problem does not often attract too much of the people¡¯s attention. However, in fact, it would bring about much more serious harm than embezzlement and corruption. Take ¡° Image Project¡± for example, the construction of project would take up large amount of funds of public finance, and yet, it is unable able to bring about benefit to the lives of the ordinary people and it also in no way plays a role in accelerating the economic constructions across the whole nation. Actually, it is just a kind of waste of resources. Consequently, audit work should not only investigate mistakes and correct malpractice but also, on the basis of auditing financial revenues and expenditures, at the same time, pay attention to the value for the use of funds, and through an analysis and assessment of the value for administration and use of funds, we should put forth suggestions related to strengthening and improving the management, accelerating reasonable disposition of resources and obtaining high value for returns.
At present, most of the developed countries in the West have developed their audit from traditional audit to performance audit which, launched by some audit institutions of governments of countries, has become an important component part of the system of governmental accountability supervision. Internationally, there is a variety of different kinds of definitions with regard to the understanding of performance audit. In my personal opinions, performance audit is just an audit conduct of an assessment, from certain levels, of the consumption of resources and its effect and of putting forward suggestions and countermeasures directed to the existing problems. Here, the range of what resources contain is very wide. It contains resources of materials, environment, manpower, funds and other areas, however, performance audit is just the assessment made by auditors of the situations related to the consumption of the in-put resources and production according to certain standards. The assessment focuses on its value, efficiency, effect and whether or not it reaches it¡¯s target, and on the analysing reasons directed to the problems found and putting forth proposals and countermeasures.
In 2002, the National Audit Office of China set forth requirements of exploring vigorously launching performance audit and as early as several years ago, Shengzhen and those localities where economic development had been relatively higher had started the exploration of performance audit. To a certain extent, China formally launched performance a bit later than some other countries, but in terms of the conditions of our country and the situations of development of audit work in China, performance audit set forth at present is practical and realistic. On one hand, our audit institutions have been built for over twenty years, a contingent of audit cadres who have relatively higher general quality have been trained, a relatively complete audit theory system has been established and some effective audit measures have been summarized; on the other hand, changes have taken place in an overall social economic environment with which the audit worker are confronted, the whole situations with regard to the financial management in various institutions have gradually been standardized and the basis for launching performance audit has been initially provided with .
Over the years, audit offices at all levels across the nation have actively probed into performnace audit and put it into practice in variety of forms, combining themselves with the realities of their own. This has been embodied in the following three aspects: a, attach importance to the value for investment and increase the strength of auditing mayor governmental investment projects, b, pay attention to the value for the use of special financial funds and increase the strength of auditing and audit investigating special funds; c, choose particular projects and launch special assessment of performance . Audit institutions in Jiangsu, Shandong, Tianjin, Shengzhen and etc¡have practised, summarized, popularised their performnace audit methods and experiences simultaneously in the course of performance audit , and initially worked out some useful methods and gained some useful experiences suited to the local environment of their own. They have made remarkable achievements in that respect. For an example, in 1998, an investment audit bureau was set up in Shengzhen Municipality. During 7 years, it had audited all together the governmental investment fund of over 80 billion Yuan, checked and reduced project fund of 7.7 billion Yuan and the amount of check-reduction on average per capita in this bureau had reached 1.33 hundred million Yuan. In the course of performance auditing the special fund Qingdao Municipal Government had put in for improving air environment, the Municipal Audit Bureau made a suggestion that the municipal government should stop construction of one of the two heating supply stations which were too close to each other. Consequently, it had not only saved three hundred million Yuan of investment for the municipal government but also decreased the peripheral environmental pollution. The performance audit had achieved conspicuously good results. It had not only increased the value for the use of funds but also urged on the government and relevant departments to raise their level of making decisions and of management. The local people¡¯s congresses, governments and the masses of social communities had unanimously had high opinions of the audit bureau.
The performance audit is the objective of higher-level audit and the direction in which the audit work develops. There is a very long way to go before meeting the demands in this area because of China¡¯s present level of economic and social development, situations regarding financial and economic order, the quality of audit work and the general quality of audit personnel. With regard to this issue, we can neither act with undue haste nor bound hand and foot and stop marching forward. We should do away with mystery, explore vigorously and put it into practice gradually. First, we should pay good attention to combining performance audit with audit work on financial revenues and expenditures. performance audit must be based on audit of financial revenues and expenditures. Without the latter, merely the former won¡¯t work. Secondly, we should strive to improve the quality of auditors themselves, increase training capacity, gradually enhance and raise the ability and the level of launching performance audit. Thirdly, in the course of launching performance audit, we should invite a part of external experts, making full use of external forces to make up for the shortage of the relevant professional forces of our audit institutions. Fourthly, while choosing projects, we should stress the focal points, do auditing starting from the most conspicuous and the easiest- to-be-beneficial projects. We should focus on solving the problems related to losses and wastes.
This year, the National Audit Office of China explicitly points out that audit offices at various levels should follow the relevant stipulations in the Constitution, the Audit Law and the requirements set forth by five-year plan for the development of audit work, combine it with reality, pool forces to a certain extent, carry out audit work and audit investigations of value for the expenditures of funds of public finance, focus on exposing and correcting problems related to major losses and waste in financial expenditures, promote strengthening management and increase the value for the use of funds. Being centred on mayor state investment projects and some special fund related to the vital interests of the masses, we have focused on the arrangement of audit and audit investigation of the special funds related to the Three Gorges project, projects of construction for sports facilities of the Olympic Games of 2008, environmental protection, social security,¡± Agriculture, Rural areas and Farmers¡±, anti-poverty and etc¡. At the same time, we have asked the audit offices across the country to follow the central work of the local economy, the focal points to which the leaders of the local Party and government pay attention and the outstanding problems with regard to the vital interests of broad masses, and to choose purposely some projects, actively launch auditing and audit investigation, to bring to light the problems affecting the value for the use of and the management of funds, to promote raising the level of the management of funds of public finance , and to bring the value for the use of funds into full play. Particularly, in terms of relatively bigger governmental investment projects, following the demands by local Party committee and the government, we should enhance further the audit ability, pay attention to investigating and dealing with the problems related to redundant constructions, losses and wastes in the course of project constructions and accelerate the increasing of the value for investments.
(Published in Economic Daily on February 23, 2006)
