Preventing financial harm through detailed audits

Hu Zejun, auditor general of the National Audit Office, presented the Audit Work Report for 2016 to the 28th meeting of the National People's Congress Standing Committee on June 23, in accordance with the Audit Law and as per the task entrusted by the State Council.

The report has since been made public. It shows that the central budget implementation for 2016 was good in general, with features like intensified fiscal policy, enhanced safeguards for people's livelihoods, progressive reforms in fiscal and taxation systems, and improved budget management.

The report also points out that, with growing awareness about fiscal and economic laws, and regulations, relevant departments and local governments are correcting problems identified in the 2016 and 2017 audits.

However, the report also discloses problems in the following areas: central fiscal management and final account draft; budget implementation by the central government authorities; implementation of major national policy measures; management and use of poverty alleviation funds; key special funds; financial institutions; and central State-owned enterprises.

Most of the problems were caused by the following factors: management modes do not meet the requirements of reform; reform is not implemented as projected; and policies and measures are not in place or ineffective.

A complete work cycle is formed from the report and public announcement of the audit results in the executive meeting of the State Council. That is, problem detection, public announcement of audit results, rectification, and public announcement of rectification results will ensue.

This not only proves that the Chinese government attaches great importance to audit supervision and audit rectification, but highlights the important role of audit in promoting anti-corruption campaigns, deepening systemic reforms and launching prevention and control of economic risks and hidden dangers.

Take local governments' debt for example. In recent years, the National Audit Office has constantly highlighted changes to local governments' debt level.

In 2011 and 2013, the National Audit Office carried out two large-scale local government debt audits. The office inspected debt sizes, structural changes, debt financing behavior, management and use of debt funds; analyzed change trends; put forward audit recommendations for systemic improvement and risk prevention.

This effectively promoted debt management, curbed local debt growth momentum, and constantly improved debt financing mechanisms.

As demonstrated by the prevailing practice of the past years, audit has significantly improved local debt risk prevention and control capability. This has helped set up a safety net and build a firewall to prevent and control local debt risks. This is highlighted by the effective and legal use of "three key measures" as follows:

First, announcing audit results and improving transparency of audit. The best solution to local debt problems lies in openness and transparency, while the greatest hidden danger lies in failure to achieve openness and transparency.

Second, making progress in rectification of the problems revealed by audits, and promoting the improvement of relevant systems.

Third, promoting accountability investigations and helping local governments and leaders administer according to the laws.

There is an old Chinese saying: "Caution is the parent of safety." Although an initial local debt monitoring and prevention mechanism has been established, and relatively rapid local debt growth in some regions is fully controllable, it is necessary to continue to pay attention to these problems.

In the future, audit institutions and auditors should continue to firmly uphold overall national security; pay close attention to the situations of local debt management; reveal and report any signs of problems without delay and contribute to steady and sound economic and social development.

The author is director general of the Audit Research Institute of the National Audit Office