Auditor-General Li Jinhua reported to the Standing Committee of the 10th National People's Congress (NPC), on June 23 that 1.4 billion yuan (US$170 million) of the 2003 budget had been misused or wrongfully appropriated by 41 of 55 government offices under investigation.

The report sent shockwaves throughout the nation. Li, described "the man with the iron fist" by the Chinese media, recently agreed to an interview with Xinhua News Agency.

In a meeting room at the fifth floor of the National Audit Office, the mild-mannered, soft-spoken Jiangsu native is a far cry from the stereotyped defender of truth and justice. But he speaks frankly and with quiet determination.

In June 1999, Li Jinhua was applauded when he finished reading the audit report to the Standing Committee of the 9th National People's Congress. The following years have seen increasing transparency in the reports. "The audit is the watchdog of state funds," says Li.

Xinhua: Did you expect that this year's audit report would receive greater public attention than last year's?

Li Jinhua: It is about as I expected. This is good. I think the people are concerned about the report I made to the NPC Standing Committee. I should make it clear that the State Council entrusted me with publishing the report. Although I provided the materials, that was not my personal decision. It is the government -- or the premier -- that is determined to expose these problems in order to rectify and solve them.

Xinhua: What significance do you think the disclosure of the audit results have?

LJH: The problems involving government departments must be reported to the NPC Standing Committee and to the public. I think this is very important. Openness and transparency have proved worldwide to be the best way to crack down on corruption and bureaucratism.

Xinhua: You delivered the report on June 23. A week later, the Law on Administrative Licensing went into effect. In what respects do you think auditing is associated with administration by law?

LJH: Auditing was regarded as a kind of supervision many years ago. My definition of audit is that it's not just a means of supervision. It's also a means to promote democracy and rule of law. One of the priorities on our agenda in recent years has been to promote openness in government administration, particularly the departments in charge of money. It is very significant for the central government to execute its responsibilities according to law and to establish the rule of law. This is the key to rooting out corruption and resolving issues that cause dissatisfaction among the citizens.

Xinhua: What do you think of your role in the transparency of audit reports?

LJH: I really don't think I deserve the tributes given by some of the media, but I'd like to take this opportunity to thank them. The audit no doubt comes first to the public mind when the government administration is improving transparency. When audit reports are made public, problems will be exposed, and the citizens feel that the audit office is speaking for them. So it's not an issue of my personal role. It's the law that empowers me to do it.

Xinhua: How do the central authorities support the audit?

LJH: The strongest support is non-intervention. During my 20 years in auditing and some seven years as auditor-general, no state leader has ever ordered me not to do something. All the audit results were reported to the State Council. Our work is specified in the Audit Law and I can exercise my power to the fullest, deciding what and how to audit and how to write and publish the reports.

Xinhua: After the publication of the audit report, the Standing Committee of the National People's Congress and the State Council ordered that the problems that were identified be dealt with severely. What is happening with the major cases exposed in last year's report?

LJH: All the cases were transferred to the appropriate departments. This means our work is finished. As far as I know, all the responsible people in those cases were punished, but only 70 percent of the embezzled funds were returned.

Xinhua: Some audited units and organizations deny the results of this year's audit report. Are you under any pressure?

LJH: No. It is common for auditor and audited to have different opinions. We are equal. If the audited organizations are unconvinced, we can re-audit. If we make mistakes, we will apologize to the public.

Xinhua: Well, not all the audited departments can take things so philosophically.

LJH: I believe that sometimes it is just a matter of saving face. Some people always think first of covering up problems, as they are afraid it will make them lose face. In fact, they know they have made mistakes. Some banks that want to be listed on the stock market have asked me not to publish their problems. I told them my opinion: making these issues public sooner is better than later, because they will eventually have to face the problems. Finally, they agreed with me.

Xinhua: Some departments have repeatedly misused funds despite the audits. When will this end?

LJH: It's understandable that people hope to settle problems immediately. But many of China's problems cannot be resolved in a single stroke. It involves the system and tradition, and interest is an issue as well. Under the planned economy, everything -- sales, profits, et cetera -- of a department or a company belonged to the state. There was no need to bother about making fake accounts. Now, in addition to national interests, there are regional, departmental, and individual interests. And the legal system is not perfect. So in my opinion, the phenomenon will exist for quite a long time. What we can do is to make every effort to shorten that time.

Xinhua: What is your attitude toward violators who refuse to mend their ways after an audit?

LJH: Put them under audit monitoring.

Xinhua: Some people say you have an iron fist. Do you agree?

LJH: That is my self-assessment. I have to be iron-fisted if I want to do my job well.

Xinhua: Have any government officials come to you pleading for mercy?

LJH: Yes, quite a number of them.
 
Xinhua: How do you handle such a situation, especially when the person has the same official rank as you?

LJH: In most cases, I let the person know my position. It's impossible for me not to report the case to the premier, because that is my responsibility. I also tell him that we will immediately double-check and correct our mistakes if they think the audit results are incorrect. If the results are correct, I suggest they rectify the problems right away so that I can report both the problems and the remedies. I often tell the audited units that have problems, "You had better let me report two 'whats' instead of just one: What problems you have and what you are doing to correct the problems." Human beings tend to be forgiving of people who are correcting their mistakes. I don't like to put the problem units in dire straits.

Xinhua: It seems that "Ironfisted Li" can also make concessions under certain conditions.

LJH: But I never yield on matters of principle.

Xinhua: Some people say that you will finally lose all your friends. Yet you persist on your own path. You've been quoted as saying, "I don't care, and I seek no personal gain."

LJH: I also said, "The person who holds the position of auditor-general must cut off his or her own route of retreat.

Xinhua: When all is said and done, you are a member of officialdom. Aren't you afraid of offending too many people?

LJH: If you offend all people, then you offend none. That is my philosophy.

Xinhua: To your recollection, have there been any departments that you don't dare audit?

LJH: None. Except those exempted by law, all the state-funded departments are under our purview.

Xinhua: Your former schoolmates are leaders of several departments.

LJH: We audit them all the same.

Xinhua: What procedures have you adopted in auditing?

LJH: I think that auditors should answer four questions.

First, what is it? We must find the truth.

Second, why did they do it? Some abuse their power for the interests of small groups, or out of self-importance; some are forced to do it. So we should treat them differently.

Third, what is the impact? We should see whether it hurts the citizens, or if it causes great losses to our nation. Although some behaviors don't accord with regulations, they don't cause great losses. Some may even benefit reform, opening and economic development. So we will not regard it as a problem, and consider that regulations might be outdated.

Fourth, how can the problems be solved? We will get the answer after the three questions above are answered. I think that by answering these four questions, unjust and misjudged cases can be avoided.

Xinhua: Are there any shortcomings in our audit system?

LJH: We still have some catching up to do in timing. Currently, everything is examined after it happens. Sometimes the audit lags. Although some problems are dug out, the losses have already occurred and can't be recovered. Therefore, we now have to strengthen supervision during operations, try to find the problems and urge correction then.

Xinhua: Compared with Western countries, what are the advantages of China's audit system?

LJH: We have different audit systems. The audit office in Western countries, which is independent from the government, is responsible to Congress. After they finish their audit, they report to Congress. Then Congress will question the government departments according to the audit report. The process takes a long time, and sometimes it ends up with nothing definite.

In China, the audit office is a part of the government. We have lots of ways to audit. For example, we can cooperate with judicial departments and government supervision departments. The audit office also has the right to punish violators; and we can cooperate with the media for supervision. In Western countries, the audit depends mainly on media supervision and the auditing office has no disciplinary authority.

Xinhua: What are the weaknesses in our system?

LJH: I would say the lack of independence. This weakness is most conspicuous at the local audit agency, especially when the issue concerns the local government or the mayor. In most cases, these are concluded with the problems remaining.

Xinhua: What are some of the Western methods that we should learn from?

LJH: Their auditing agencies have more independence than ours. In addition, their financial audit is a relatively small part of the process, because their standardized budget system results in fewer cases of embezzlement or unjustified charges. Instead, more resources are devoted to performance audits -- auditing public funds' economic, social and environmental performance. The performance audit is what we need to improve. The focus of our audit is gradually moving toward that. It is expected that half of our resources will be devoted to performance audits by 2007.

Xinhua: You have been in auditing for 19 years already. How many points would you give to your work, on a 100-point scale?

LJH: About 70.

Xinhua: What are the most important items on your agenda as auditor-general?

LJH: Three items: increase the share of performance audits; accelerate the process of audit transparency; and further strengthen internal control and management to improve the quality of the audit.

Xinhua: According to the five-year plan of the National Audit Office, all of the audit report except those concerning state and commercial secrets will be open to public scrutiny by 2007. How will this plan be put into place?

LJH: We have been accelerating the pace in materializing this plan. Last year, as a trial, we made public the audit report on the SARS fund. I believe that this kind of publication will increase substantially this year.

Xinhua: What ensures that the audit of the National Audit Office is conducted in accordance with laws and regulations?

LJH: The Audit Law will be amended before long and we have offered two suggestions. The National Audit Office should establish a report investigation commission, so that the audit reports will be examined by a group of professionals. Also, a government agency supervising and auditing the National Audit Office should be created. The establishment of these two agencies will help to make audit reports more objective and fair.

(Xinhua News Agency, translated by China.org.cn, July 15, 2004)