On June 23 Auditor-General Li Jinhua submitted the 2003 audit report to the Standing Committee of the 10th National People’s Congress (NPC). The report, disclosing alarming misuses of funds by central and local government agencies, has created a nationwide uproar.

The Oriental Outlook Weekly obtained an exclusive interview with Zhang Qiuxia, director of the National Audit Office’s (NAO’s) Department of Non-Profit Government Agencies Audit, to provide an official explanation of the report and the work of the NAO.

Oriental Outlook Weekly: This is the second time that the audit has discovered malpractice by the State Forestry Administration (SFA). Did they not make an effort to correct their problems?

Zhang Qiuxia: We did disclose in the 2002 report the malpractices of institutions under the SFA and direct them to correct those malpractices. The SFA has submitted its report on the process and result of corrective action to us. But other institutions under the SFA were caught misusing funds for the year 2003. The SFA knows it is important to correct malpractice by its subordinate institutions and plans to step up its efforts in this regard.

OOW: Some people say the monies that were used by the General Administration of Sports are connected with International Olympic Committee funds. Is that true?

Zhang: You can refer to the audit report for the answer to this question.

OOW: The NAO will reportedly audit institutions of higher learning. Why is that?

Zhang: The plan to audit institutions of higher learning is required by the Conference on Administration Honesty convened by the Central Commission for Discipline Inspection of the Communist Party of China and the State Council. Moreover, the citizens expect institutions of higher learning to be audited.

OOW: What was the reaction of the Ministry of Education (MOE) to the audit report on basic education? We have seen little in the way of a response.

Zhang: The MOE knows the audit is important. It has stepped up its efforts to correct the unjustified education fees. Fifty counties are covered in the 2003 report; limited resources prevented us from auditing other counties. We are sure that malpractice exists in those unaudited counties as well.

OOW: According to Auditor-General Li Jinhua, the audit should eliminate severe malpractice in central government agencies in three years. Do the trends reflected in the past several years of audit reports confirm that prediction?

Zhang: In recent years, we have been intensifying our audits of budget utilization by central government agencies. The reports from 1999 to 2003 show that the incidence of malpractice, in general, has been declining. The 2003 figure is higher than that of 2002 because of the increase in the number of second-tier budget institutions that are covered by our audit and the rise in our audit resources.

OOW: What are the most common types of malpractice in the central government agencies?

Zhang: In 2003 they were more or less the same as in previous years. However, the indication of particularly high incidences of one or two types of malpractice may vary owing to the different focuses for the audit each year. Furthermore, the agencies will strengthen their supervision of areas where malpractice is rampant according to the audit report, but malpractice may well pop up in other, less vigilantly watched, areas.

OOW: Some central government agencies have reportedly expressed doubt about the Yangtze River Dam Project audit. What is your view?

Zhang: I believe that we have done a solid job. We have been striving to enhance the quality of the audit. There will not be any errors in our determination of the nature of the wrongdoings. In general, the central government agencies have been doing very well in coordinating our work and correcting malpractice, recognizing the importance of the audit. They may, however, have doubts about some issues. Nonetheless, we must conduct our audit and weigh issues in accordance with the laws and regulations.

OOW: We heard that the NAO will start auditing the General Office of the Communist Party of China (CPC) Central Committee and General Office of the State Council this year.

Zhang: Last year, the National Audit Office conducted research and investigation, and then adjusted the audit fields of some subordinate representative offices. In the past, we only examined departments under the State Council. Now, the finances of departments of the CPC Central Committee, NPC, Chinese People’s Political Consultative Conference (CPPCC), public security bureaus, procuratorial organs, courts, and mass organizations have all been placed under our supervision. That is to say, all the state-funded organizations will be audited.

The audits of the NPC and CPPCC have not begun, but they will be phased in. Usually, the audit starts in July and continues to late June the following year. We are now considering the plan for the second half of the year.

The audits of ministries are routine work. The audit report this year involves seven of them, although we audit the budget utilization of some 50-60 departments of the State Council a year.

OOW: National Audit Office and these ministries are ministerial departments under the State Council. What do they think of your work? Are they afraid of you?

Zhang: The audit gives their financial managers some anxiety.

OOW: Are judicial departments also audited?

Zhang: Departments outside of the State Council have just been included on our audit list, so there was no examination of them in 2003. But we have conducted special audits and investigations of them in the past several years, including the public security bureaus, courts and prosecutorial offices.

OOW: In 2003, did the central government ask you to give priority to certain ministries?

Zhang: There is no such specially mentioned audit of particular ministries in the report this year. It was just routine work.

OOW: The perceived problem is that even though we have the audit, the punishment of those responsible is long delayed. The State Administration of Forestry is an example: the ministries involved have provided little or no response. What are your views on this problem?

Zhang: The CPC Central Commission for Discipline Inspection and Ministry of Supervision are drafting punitive regulations to standardize their application.

OOW: Many people think that the National Audit Office should be directly under the National People’s Congress. What do you think of this?

Zhang: It is true that we have no enforcement authority, like judicial departments have, when dealing with economic crimes. Therefore, our work is restrained when handling important cases.

The public security department can detain people; and the CPC Central Commission for Discipline Inspection has “Double Discipline” (to tell the truth in the specific time and place), but the audit office has no such authority.

OOW: Do audit departments frequently check into the financial reliability of government and Party officials?

Zhang: One department of our office does that work. We also audit leaders from both the government and the Party. We conduct financial reliability examinations of ministerial and provincial leaders, after being so entrusted by the Organization Department of the CPC Central Committee.

OOW: Do you mean the audit mainly targets government departments instead of individuals?

Zhang: Yes. We only examine the revenue and expenditure of the organizations. If it involves individual economic crime, we send them to supervision or judicial departments. We also punish some departments, ordering them to return wrongly obtained funds and fining them.

OOW: What is the role of the National Audit Office in the anti-corruption campaign?

Zhang: It has several influences. First, its supervisory function restrains the power of these entities in terms of revenue and expenditure. Government departments have the right to make and implement budget policies and distribute the budget. Second, our work exposes major problems related to regulations and laws, and helps uphold financial rules and regulations.

Auditing helps curb high-ranking officials’ corruption. The disciplinary and supervisory bodies need our cooperation when handling certain cases.

OOW: You examine and investigate others, but who supervises you?

Zhang: First, we conduct our auditing and deal with problems according to the law. Moreover, we regulate our staff.

Generally speaking, our auditing does not produce incorrect results. We make everything clear and determine the nature in accordance with the law. When the audit report comes out, we discuss it with the audited units. If they have any objection, we will audit once more. The Law Department of the National Audit Office conducts a final review of our report.

OOW: Li Jinhua, when interviewed last year, revealed that four high-ranking officials from the National Audit Office were punished. What happened? Is there any new information this year?

Zhang: The supervisory department or Party committee of the National Audit Office should answer that question. I am only in charge of auditing business. We enforce the laws strictly, especially in the past two years. Auditor General Li Jinhua is very strict with us. We pay close attention to this.

OOW: Some areas in China have made their auditing results available to the public. Will this move spread across the country?

Zhang: Local auditing institutions submit their reports to the local governments. We only guide their work. We present to the public the audit report in the form of a bulletin. This year we have made two editions. Last year we made an audit bulletin about funds for fighting against SARS. The audit report is usually included on our website (http://www.cnao.gov.cn/), except the confidential or classified portions.

OOW: This year’s report has created quite a stir. Many people are applauding your office and condemning those that misused funds.

Zhang: I think there have been more responses to the audit report this year from the website and media than before. The public acknowledges our work. They feel we contribute to better management of state funds and retrieve losses for our country.

Furthermore, our work has also exposed some major illegal practices. The audit has contributed to the reform of the economic mechanism and to the development of the legal system. The public has a lot of faith in us. They want us to intensify the auditing supervision and widen the areas audited. We will try to live up to the expectations of the people. Yet as our role is limited, we can only stress the major points.

(The National Audit Office website at http://www.cnao.gov.cn/ is available in both English and Chinese.)