Government Performance Audit in Shenzhen
- The practice of government performance audit
(1)Background of performance audit
As a special economic zone that has developed for over twenty years, Shenzhen provides fairly favourable economic, political and social environments for taking the lead in conducting performance audit in China. In 2005, the GDP in Shenzhen City broke through 400 billion yuan (RMB, same below) to reach 492.7 billion yuan, holding the fourth place among large and medium-sized cities throughout the country. The export in foreign trade broke through 100 billion US dollars and the local financial revenue hit 41.2 billion yuan. Beginning from the establishment of the special zone up to the present, Shenzhen has persisted in the pattern of administrative management of “small government and big society”. The market economy is quite developed and the government functions tend progressively towards public services.As early as 1992, Shenzhen obtained the legislative power of a special economic zone and the residents in the city have some democratic ideas and sense of effectiveness. Corresponding to economic and social development, the comparatively abundant finance in Shenzhen has made it possible for Shenzhen to build up the framework of public finance gradually. It has continuously increased the in-put in education, environmental protection and infrastructural facilities, and at the same time has introduced departmental budget in an all-round way, itemized expenditure plan, and optimized the allocation and utilization of financial funds. All those conditions have constituted the objective basis for conducting government performance audit, and the continuous deepening of the audit of budget execution has also led to the development of government performance audit.
In recent years, the auditing offices in Shenzhen have been pragmatic and initiative, working hard to march towards the modern audit, distinguishing themselves in the professional fields such as audit for the government-invested projects, audit for economic responsibility and audit for a township (neighbourhood) or a village (residents’ committee). This has laid a sound professional foundation for carrying out government performance audit. In July 2003, the National Audit Office of China formulated the Program of the National Audit Office of China for the Development of the Audit Work during 2003 – 2007. It was provided in the Program that equal stress should be laid on the audit on truthfulness and legality of the public finance and the financial revenue and expenditure and the effectiveness audit, the weight of the effectiveness audit should be increased year by year, striving to attain the aim that the strength put in for effectiveness audit would hold about a half of the total strength for audit. This has pointed out the direction for carrying out government performance audit in Shenzhen and quickened the pace of auditing offices in Shenzhen in marching towards the modern audit.
(2) Performance audit projects
In 2002, the Audit Bureau of Shenzhen City organized the implementation of performance audit for the first project. Since that time, the Audit Bureau of the Shenzhen City has continuously increased the input of the strength for performance audit year after year, and by 2005 the performance audit made up one third of the workload of the Bureau. In the past four years, the Audit Bureau of Shenzhen City has organized the implementation of performance audit for a total of 25 projects, including:
In 2002, an audit was carried out for the purchase of the medical facilities and the utilization and management of the large medical facilities in the municipal health setup.
In 2003, audits were carried out for four projects, namely, the project of the Off-shore Rural Scenery Tourist Area in Shenzhen, the project of the sewage treatment plant of the Shenzhen Special Economic Zone, the project of the Economic Cooperation and Development Fund of Shenzhen City, and the project of the lottery public welfare fund of Shenzhen City.
In 2004, audits were carried out for eight projects, including the funds for three scientific and technological items, the departmental budget for the Municipal Bureau of Environmental Protection, the Shenzhen University City, the City’s passenger and freight transport stations and yards, the project of dredging Dasha River, the construction, management and conservation of 13 municipal parks affiliated to the city’s Urban Management Bureau, the non-hazardous treatment of the urban consumer waste and the construction of the city’s Donghu Hospital.
In 2005, audits were carried out for 10 projects including the government procurement at the city level for 2003-2004, the departmental budget of Shenzhen University for 2004, the management and utilization of the educational appropriations for 8 primary and secondary schools directly affiliated to the city’s Bureau of Education, the management and utilization of electronic police and road transport facilities of the city, the investment of the municipal government in yards and stations of the public transport, the construction, management and conservation of green areas by the Urban Greening Management Division of the city, the closing of the gaps in bare parts of mountains, the operation and management of the municipal Youngsters’ Recreation Centre, the operation of the city’s Yinhu Tourist Centre and the Building of the city’s Women and Children’ Development Centre.
Furthermore, the Audit Bureau of Shenzhen City has conducted on an exploratory basis an audit survey which contained performance objectives and contents. For example, in 2005, the audit survey of the economic value of using land in the belt of high technology industries in the city and the construction and management of the city’s greater industrial area broadened the sphere for audit and gave play to the macro role of the audit.
Beginning from 2004, the auditing offices in various districts in Shenzhen City, guided by the Audit Bureau of Shenzhen City, have also carried out performance audit on an exploratory basis. Up to now, performance audits have been organized and implemented for a total of 26 projects, including 10 projects in 2004 and 16 projects in 2005.
（3）The organization and implementation of performance audit
In order to carry out government performance audit, Shenzhen has made quite sufficient preparations in the strengthening of the legal system, the allocation of resources and the training of personnel. In 2001, the Third People’s Congress of Shenzhen City at its Fifth Session adopted and promulgated the Regulations of the Shenzhen Special Economic Zone on Audit and Supervision. In accordance with the provisions of the law of audit concerning the effectiveness audit of financial revenue and expenditure, the Regulations clarified the contents of performance audit and provided that auditing offices should submit reports on performance audit in the fourth quarter every year, making performance audit become a piece of statutory work every year for the auditing offices in Shenzhen. Since 2002, the Audit Bureau of Shenzhen City has organized many forms of studies, investigations and trainings. It has sent three groups of 41 key auditors to Australia and the United States to learn performance audit. In May 2003, Chen Zhigang, Director of the municipal Audit Bureau, proceeded to Hong Kong on a study mission. As a result, he wrote a thesis entitled “To Study and Learn from the Experiences of Government Performance Audit in Hong Kong”, providing practical reference materials for auditing personnel to understand and operate performance audit.
Selection of projects for audit At the end of 2003, the Audit Bureau of Shenzhen City began to establish a bank of projects, executing on a trial basis a rolling program of projects. The Audit Bureau has laid stress on the selection of projects and strictly followed the procedures for selecting projects. A planned number of projects to be audited for the year will be decided on at a meeting on for the audit work of the whole city at the beginning of each year. After that, the operating divisions will, in conjunction with the implementation of audit, put forward several projects for selection on the basis of investigations and study, or the Comprehensive Division will select projects from the bank of projects for performance audit, and then convene an audit operations meeting for appraisal. After the specific audited projects have been decided on, they should be submitted to the municipal government for record. The selection of projects for audit usually will be completed in the first half of the year.
Implementation of audit The Audit Bureau of Shenzhen City attaches importance to the pre-audit investigations and will draw up an audit implementation programme in a scientific way. After discussion and adoption by an audit operations meeting, implementation of the programme will be organized. The time for implementing an audit generally will be two months. In the course of implementing an audit, all auditing teams should collect information and data in every way possible, and make a cautious appraisal of the performance. For example, in auditing the project of the Off-shore Rural Scenery Tourist Area in Shenzhen, the auditing team adopted such methods as on-the–spot investigations, interviews with the leading cadres concerned and local residents and owners of industrial and business undertakings and visits to relevant government departments to make a thorough investigation and collect a large amount of materials about the construction and operation of the projects in the same trade, and gave an objective and apropos appraisal of the performance of the project. Another example was the audit for the lottery public welfare fund. In order to improve the scientificalness of the performance appraisal, the auditing team further expanded the scope of investigations and study, conducted a special inspection of the contents of nursing-the-old service in the social services in the Hong Kong Special Administrative Region, and gave a cautious evaluation of the investment of the public welfare fund into large infrastructural projects in the light of the advanced ideas about providing for the aged and the local circumstances in Shenzhen.
In the course of implementing an audit, the Audit Bureau of Shenzhen City laid stress on strengthening its guidance on audit operations. The chiefs of the bureau often went deep into the audited spots to direct the work, regularly called audit operations meetings to solve problems encountered in the auditing, controlled and directed the whole process of performance audit, and helped auditing personnel to adhere to the audit objectives and utilize the audit resources effectively.
Audit reports The Audit Bureau of Shenzhen City has guaranteed the quality of audit reports. The usual practice is that an audit operations meeting to be attended by chiefs of the auditing teams will be called at the forthcoming end of the stage of the implementation of audit to discuss in a concentrated way the way to write audit report and clarified the requirements for the writing. In order to regulate the writing of audit reports, An Opinion on Writing Performance Audit Reports and Their Summaries was drawn up in 2004 to serve as a reference for various operating divisions in the implementation. Along with the increase of projects for performance audit year by year, quite many departments and personnel have been involved. In 2005, the operating flow for writing audit reports became further strict and a system on responsibilities for writing audit reports, checking them and examination and approval by the leading cadres was established.
On the basis of the audit reports and their summaries submitted by various audit teams, the Comprehensive Division will write an annual report on audit work, and at the same time, pool the developments of the reform and consolidation of audit in the previous year. The annual report on audit work is composed of the text and the attachment. The former includes the basic situation and the summaries of audit reports of various projects, and the latter contains the full texts of audit reports on various projects. The annual report on audit work should, first of all, be submitted to the municipal government, and after the examination and approval by the municipal government, it should be submitted to the Standing Committee of the municipal People’s Congress for deliberations, then the municipal Standing Committee of the People’s Congress will inform the municipal government of the results of its deliberations.
In 2002, the summary of the results of the first performance audit was made public through the media. Beginning from 2003, the report on the work of performance audit was published through the media in full text. In 2005, the Audit Bureau of Shenzhen City made known to the public the results of the audit for 8 projects in 2004.
- The effects of government performance audit
On the basis of examining the trustfulness and legality of the public finance and the financial revenues and expenditures, performance audit has attached importance to examining the thrift, efficiency and effect in utilizing financial funds and public resources, finding problems existing in the field of management and system, and put forward corresponding opinions and proposals for improvement. The implementation of performance audit has created a new situation for the audit work in Shenzhen and given impetus to the relevant government departments and units in performing their duties earnestly, making efforts to improve the capability of wielding political power and utilize the financial funds and public resources effectively, thus contributing to the building of a harmonious Shenzhen and an effectiveness-based Shenzhen.
（1）Performance audit has created a new situation in the audit work in Shenzhen
Audit in Shenzhen is marching towards the modern audit with performance audit as the leading factor. The performance audit has widened the space of audit operations. It is playing an increasingly positive role in performing the duties of supervision, building a responsible government, and promoting the rational allocation and effective utilization of the public resources.
Through the implementation of performance audit, the auditing personnel have updated their thinking, expanded their knowledge, and improved their skills, thus accumulating experiences and creating conditions for the new development of the audit work..
（2）Performance audit has stirred up an “audit storm” in Shenzhen
In 2002, the results of the first performance audit caused heated discussions by the members of the Standing Committee of the People’s Congress. The Planning and Budgetary Committee of the Standing Committee of the municipal People’s Congress pointed out in its preliminary examination that “This is a piece of innovative work in the setup of government audit in this city and even in the whole country and is of vital significance in the scientific appraisal of the degree of thrift, efficiency and effect achieved in the utilization of financial funds, the regulation of budget performance, the change of thinking of the departments and units in utilizing financial funds, the constant improvement of the management level of the departments and trades, and the improvement of the effectiveness in utilizing the financial funds.” It was the common demand of the members of the Standing Committee of the municipal People’s Congress to make reinforced efforts in implementing performance audit and to take as the focal points the projects into which a large amount of financial resources were put and with which the masses of the people concerned themselves, thus raising the curtains on “the audit storm”.
In December 2003, after the Standing Committee of the municipal People’s Congress listened to the report on the work of performance audit and the report on the preliminary examination, Huang Liman, Deputy Secretary of the Party Committee of Guangdong Province, the Secretary of the municipal Party Committee, and the chairman of the Standing Committee of the municipal People’s Congress, who chaired the meeting, emphasized immediately at the meeting that the government investment funds were the money of tax-payers. Every single penny was the result of toil. Careful calculations and strict budgeting must be made to use the limited amount of funds on the projects which were most needed. It is the duty-bound responsibility of a people’s congress to exercise supervision on the government-invested projects and the utilization of the funds. We need to further strengthen the work of performance audit and gradually establish a public announcement system, and at the same time establish a system for appraising budget performance. The news media should increase the supervision of the public opinion over the results of performance audit. Those that should be exposed to the open should be done resolutely, so as to create an atmosphere of the joint supervision by the whole society. Then, Li Hongzhong, Mayor of the city, who was present at the meeting, also pointed out that for every sum of funds allocated for every government-invested project, we should keep in our minds all the time that it is the money coming from tax-payers. We should use it well and handle it well and should consciously place ourselves under the supervision by the People’s Congress, and accept on our own initiative the supervision of all circles in the society. After that, the larger news media in Shenzhen City and Guangdong Province and the domestic internet sites reported with huge space and in important position the results of the government performance audit in Shenzhen that year and the related information and supported them with relevant commentaries for many days running. The leading cadres of the People’s Congress and the government departments concerned, experts and scholars and ordinary townspeople expressed their views all at once. The performance audit in Shenzhen became the focus of concern of the public opinion, and some media called it “the audit storm” in Shenzhen. The Standing Committee of the municipal People’s Congress gave a high appraisal to the report on the work of performance audit by saying: “The report on the work of performance audit has given fairly objective assessment on the social and economic benefits achieved by the projects in four fields, reflected in an all-round way the conspicuous problems existing in the effectiveness, efficiency and results and the related legality in the utilization of project funds and the work of construction and management, and put forward with a clear aim the audit proposals for improving performance and the work. It is a report with full and accurate contents, and a comprehensive, objective and highly constructive report.”