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No.30 of 2011: Results of Notary Auditing in 2010 of 102 Projects of Foreign Loans and Assistance
2011-05-20日   Soure : :

Results of Notary Auditing in 2010 of 102 Projects of Foreign Loans and Assistance

In accordance with the Audit Law of the People’s Republic of China and relevant regulations governing foreign loans and assistance, the National Audit Office of P. R. China (the CNAO) in 2010 organized Auditing Service Center for Foreign Loans and Assistance Projects and relevant resident audit offices of the CNAO to conduct an audit of the financial revenue and expenditure and project implementation in 2009 of 102 projects of foreign loans and assistance carried out or organized by the central government departments. A total of 103 audit reports have been issued to organs of foreign loans and assistance (In keeping with requirements of the organ of foreign loans and assistance, 2 audit reports concerning 1 project were issued). The audit was undertaken in accordance with international auditing standards and the National Auditing Standards.

1.     General situation

The 102 projects of foreign loans and assistance being audited include 26 projects of loans and 70 rojects of grants or assistance. Of them, there are 49 projects of the World Bank, 12 of the Asian Development Bank, 37 of the UNDP and 4 of the British International Development Department, cover many fields such as agriculture, energy, communications, education, public health, urban construction and environment protection, etc. The total sum of planned investment amounts to RMB 289.767 billion, while the volume of foreign funds to be used reaches RMB 38.582 billion. As of December 31, 2009, the accumulative volume of spent investment amounts to RMB 177.478 billion, of which the accumulative volume of foreign funds that was used amounts to RMB 24.311 billion.

The audit results show that the overall situation of implementation on projects of foreign loans and assistance is good. Carrying out their duties of managing the projects of foreign loans and assistance in a conscientious way, the relevant departments have played an active role in guiding and supervising the implementation on relevant projects. They helped the smooth implementation of those projects and raised the efficiency in the use of funds. Most units can strictly carry out state financial and economic laws and agreements on foreign loans and assistance, conscientiously organize the implementation on the projects. They have established and perfected relevant internal control systems, standardized financial management and accounting, and laid a good foundation for attaining anticipated goals as set in these projects. The implementation on projects of foreign loans and assistance has played a positive role in making up for needed funds, introducing advanced concepts and bringing up management personal, therefore bringing about economic, social and environmental benefits. However, the audit has also revealed a number of questions that can’t be ignored in aspects of managing the construction of projects, implementing rules, regulations and agreements, financial accounting and fund control. Of the 103 audit reports, 86 of them, or 83.50% were unqualified, 16 of them or 15.53% were with qualified opinions. There is only 1 report, with the percentage of 0.97%, issued with disclaimer of opinion.

2.     Major problems discovered by the audit

1)    There existed questions in 17 projects that exerted major impacts on financial reports. Audit reports with qualified opinions or disclaimer of opinion have been issued. Among them:

(1) Some problems existed in 16 projects which have had great impact on the financial reports of those units being audited and those regarding projects with specific objectives, such as making fraudulent claims on expenditure, insufficient proof for expenditures, expenditures not in keeping with regulations concerning relevant projects, ways of purchasing not in keeping with regulations concerning the relevant project, application for cash drawing and expense account not in conformity with actual operations, failure to compile reports in accordance with norms governing accounting and requirements as stipulated in the agreement for providing loans and assistance and false statistics in the financial report. Correspondingly the audit reports with qualified opinions were issued.

(2) There is an audit report in one project with disclaimer of opinion since there is fairly big difference between assets as shown on the account and the stock-taking results. Auditors were unable to obtain sufficient and appropriate evidence and therefore express any opinion on the project.

2)    In 50 projects, there existed problems such as failing to meet regulations or requirements as stipulated in the loans and assistance agreements and drawbacks in internal controls. Since these problems have not had major impacts on financial reports or those regarding projects with specific objectives, auditing reports with unqualified opinions have been issued.

(1) In 5 projects, there existed the problems of unavailability of counterpart funds on time or in full volumes, involving RMB 99,616,600 , or 4.9% of the total sum of projects

(2) In 7 projects, there have occurred misappropriations or holding –up of project funds by local financial departments or projects units, amounting to RMB 219,000,000, or 6.86 % of the total sum of the projects.

(3) In 36 projects, there existed some problems involving funds amounting to RMB 492,000,000, or 35.29 % of the total sum of projects. These problems include calculations of labor costs by fraudulent means, listing as expenditures expenses not related to projects or listing more expenditures, sub-standard financial invoices, paying conference and management fees above the norms, failure to deduct taxes as required, accounting being not in keeping with regulations, ill-management of funds and assets, weak internal control of financial affairs and other practices against laws and regulations and sub-standard financial management.

(4) In 13 projects, there have occurred problems involving funds amounting to RMB 832,000,000, or 12.75% of the total sum of projects. The problems are as follows: failure to invite tenders for engineering construction, the invitation of tenders being not in keeping with relevant procedures, illegal sub-contracting, operations being not in conformity with engineering and its requirements as designed, unsatisfactory engineering supervision, project-building exceeding budgetary estimates, undesirable follow-up managements and engineering, and funds and assets staying idle.

(5)  In 21 projects, the ratio of completed volume of investment is low, and cash drawing and expense account were carried out rather slowly, taking up 20.59% of the total sum of projects.

In addition, clues relating to 3 major cases of violations of laws and discipline were uncovered and referred to relevant departments.

3. The disposal of problems and corresponding rectifications

With regard to above problems, audit institutions have issued audit reports in conformity with the law and put forward with relevant recommendations. Attaching great importance to the problems as reflected through auditing, various departments undertaking the projects have made conscientious efforts of rectification. As of the end of December 2010, the departments undertaking the 16 projects in which qualified opinions were made in audit reports and 1 department undertaking the project, in which disclaimer of opinion was recorded have accepted the audit opinions and made corresponding readjustments. The departments undertaking 50 projects, in which there existed problems of violations of state laws and regulations and loans and assistance agreements, and where drawbacks were found in internal control, have taken active measures for rectification and strengthened project management. Of these, where the counterpart funds had not been in place involving RMB 99,616,600, RMB 35,195,100 has already been put in place through rectification, and the ratio of funds availability was 35.33%. Of the RMB 219,000,000 of held-up project funds, RMB 213,000,000 has been put in place, bringing the ratio to 97.26%. The RMB 482,000,000 concerning other practices against laws and regulations and sub-standard financial management has been put in place, reaching RMB 464,000,000 through rectification, with a rectification rate of 96.27%. The RMB 832,000,000 concerning questions of project engineering construction and management has been put in place, reaching RMB 686,000,000, with a rectification rate of 82.45%. In light of slow progress of project operations, the departments concerned have quickened the speed in operations through more rational use of funds and strengthening management on progress of project operations.

(The exchange rate between the US dollar and RMB calculated in this announcement was based on the standard exchange rate as of December 31, 2009, i.e. 1 US dollar for RMB 6.8282.)

No.30 of 2011.doc