An appeal has been made for auditing independence, and some bold and controversial proposals have been put on the table

　　By JIAN FA

　　With a firm determination to fight corruption, the Chinese Government has recently spread its auditing net to include leaders at the ministerial level. Several leaders at the vice ministerial level, who govern large state-owned enterprises (SOEs), have been listed as being subject to audit.

　　UNCOVERING LAND ABUSE: An audit result revealed that a department in Huanggang City, Hubei Province, expropriated land in the name of building low-cost housing for local residents, but it built a ‘vanity’ project to laud the achievement of city leaders

　　According to authoritative sources, nine SOEs are on the list, including China Petroleum and Chemical Corp., China National Offshore Oil Corp. and China National Tobacco Corp. The auditing work covers decision making, financial performance and projects with large investment. Specifically, the audits aim to examine the performance of the leaders in economic aspects of their work, restrict high-ranking leaders’ power and supervise the exercising of their power.

　　An official with the China National Audit Office (CNAO) said that auditing is now fully under way in Party and government organizations at the county level and is scheduled to extend to the prefecture level (between county and province levels) in 2005, a decision made at China’s third national working conference on auditing economic responsibility, held this year.

　　But the auditing report made by Auditor General Li Jinhua revealed serious embezzlement and fraud in budget performance in 2003, shocking society and reaffirming the Central Government’s determination to examine high-ranking officials in terms of their economic responsibility. This helps propel the process of the auditing work nationwide. The auditing of leaders at the ministerial level first kicked off in some pilot audits.

　　Wang Daocheng, a CNAO official in charge of disciplinary examination, said both time and conditions are ripe for extending the scope of auditing.

　　It is said in 2003 CNAO audited 36,000 officials nationwide, finding 67.1 billion yuan ($8.1 billion) of illegally used capital. Some 749 officials were transferred to the CPC Commission of Discipline Inspection or judicial organs to be dealt with and 267 were demoted or removed from leading posts.

　　According to Fan Peng, Head of CNAO’s financial auditing department, fending off financial risks is the focus of auditing work this year. CNAO officials have now entered Huarong, Great Wall, Orient and Cinda—four large state-owned asset management corporations.

　　Currently, the first stage of investigation has been completed and auditing just started.

　　In addition to the financial income and expenditure of these corporations, risk and turnover are also included in the auditing work. As state-owned financial corporations, they are all independent legal entities, with each having 10 billion yuan ($1.21 billion) in registered capital appropriated by the Ministry of Finance. The prime task of the four asset management corporations is to purchase, manage and handle the non-performing loans of China’s four state-owned banks (Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China) to alleviate financial risks.

　　Record Auditing Staff

　　According to authoritative sources, 25 auditing bureaus have been stationed in various ministries and commissions under the State Council, with a record high in the number of working staff. All the bureaus are under the direct leadership of CNAO.

　　To avoid “relationship corruption,” a system that alternates the working place of bureau heads on a regular basis was set up last year. Also a rotating system has been followed by the 18 representative offices of auditing staff dispatched by CNAO to various localities to audit projects financed by the Central Government.

　　Supervision Over Auditing Organs

　　GETTING RID OF FRAUD: CNAO uncovered a 7.4 billion yuan ($893.72 million) fraudulant loan case in Nanhai City, Guangdong. Liang Fuzhao, former Vice Mayor of Nanhai, was involved in the case and was arrested in June 2003

　　The achievements made by CNAO in the past few years have won great support from the public. But many problems exit. For instance, as the “auditing storm” aroused by Li Jinhua’s auditing report abated, the problems revealed in the report have not yet been solved. Some units refused to recognize their illegal activities. The earthquake disaster relief department in Yaoda, Yunnan Province, is one of them. It does not recognize its misappropriation of disaster relief funds.

　　To solve this problem and ensure the fairness of auditing results, experts proposed to hold hearings by the National People’s Congress, the highest legislature of China. At the hearings, units on the list for improper use of the central budget can debate with CNAO—a way to let related departments and the public judge whether the problems revealed by CNAO are true.

　　To improve auditing, CNAO will take some measures. Not long ago, Li Jinhua, Auditor General of CNAO disclosed that the Auditing Law will be revised and that CNAO proposed two suggestions: First, inviting special persons to examine the auditing report to make it more objective and impartial; second, setting up a department to examine the work of CNAO.

　　“CNAO audits other units and, in turn, should also receive examination from the public. Only by doing so, can we ensure the objectiveness and justness of the auditing report,” Li said.

　　Independence Is the Key

　　Liao Hong, Director of the China Audit Society, noted that to make the auditing work more efficient, the status of CNAO departments at various levels should be raised and the existing auditing system should be reformed.

　　China’s Constitution stipulates that a local auditing department is under the leadership of the local government at its level, and also under the leadership of the auditing department at a higher level. This means a local audit department is under dual leadership.

　　But local governments’ economic control and power to appoint and remove the heads of local auditing departments often put local audit departments in an awkward position.

　　To alleviate this problem, experts proposed to raise the status of local auditing departments. In an article, Vice Auditor General Xiang Junpo proposed setting up an auditing organ at the same level of the State Council, the Supreme Court and the Supreme People’s Procuratorate, under the direct leadership of the National People’s Congress. It will be free from administrative function but play a better role in supervising administrative organs. Only by doing so, can the principle of “finance by the government, supervision by the people” in auditing be realized.

　　Liao Hong also put forward a similar proposal—to set up a central auditing commission at the same level of the CPC Central Commission for Discipline Inspection (the CPC’s highest supervisory organ), with the former in charge of economic supervision and the latter Party discipline supervision.

　　Other experts hold different views on this issue. Cui Zhenglong, Deputy Director of the CNAO’s Auditing Department Research Institution, said that there is no problem with the existing auditing system, as the system suits China’s condition. Though under the leadership of the government, auditing departments still work independently thanks to the guarantee of the Constitution. Otherwise, their working space will be reduced, as the government is playing an important role in the country’s economic management.