About the Author
Ms. Yao Rui, with a master degree, is a Deputy Division Director of CNAO’s Department of Fixed-assets Investment Audit.
Ms. Yao has been working in CNAO in the field of fixed-assets investment audit for a long time with rich professional experience and solid theoretical foundation. In recent years, she has successively participated in many audit assignments, including the audit of China’s airports construction and the audit of Beijing Winter Olympic Games. She has drafted 3 national audit guidance, which were approved and distributed to the audit institutions at all levels for implementation, and drafted more than 100 documents and reports on national fixed-assets investment audit. She participated in many audit researches and published 10 professional articles on fixed-assets investment audit in China’s core journals.
China is among the countries most severely stricken by various kinds of natural disasters with wide distribution, high frequency and heavy losses. The Chinese government has been attaching great importance to disaster prevention and mitigation and progressively improving the disaster prevention and mitigation management system.
I. China’s Disaster Prevention and Mitigation Management System
More than 70% of Chinese cities and more than 50% of the Chinese population are in areas vulnerable to serious earthquakes, and meteorological, geological or marine disasters. China is occasionally battered by floods, droughts, typhoons, hailstones, thunder and lightning, high temperatures and heat waves, sandstorms, earthquakes, geological disasters, storm surges, red tides, forest and grassland fires, and plant and forest insect pests, which pose a great threat to life and property safety as well as social harmony and stability. The Chinese government gives great weight to disaster prevention and mitigation and is improving its management system, mechanism and rule of law, so as to “strengthen accountability, improve system, integrate resources and coordinate forces to effectively level up the rule of law, standardization and modernization of disaster prevention, reduction and relief as well as the country’s comprehensive preparedness to resist natural disasters”. China’s disaster prevention, reduction and relief capabilities have improved appreciably, as evidenced by a sharp decrease in the ratio of disaster losses to national GDP. In 2018, the Ministry of Emergency Management of the People’s Republic of China was established to guide local authorities and departments in response to emergencies, coordinate emergency forces and material reserves and dispatch them in disaster relief, organize to build the disaster relief system, guide emergency relief related to safe production and natural disasters, and command the state’s handling of major disasters, etc.
Pursuant to the Constitution, the Audit Law and other laws and regulations, CNAO is responsible for independent audit of disaster management work including the raising, distribution, appropriation, and effective use of funds and materials for disaster relief and post-disaster recovery and reconstruction, regular publication of information on the use of funds and materials, and announcement of audit results. CNAO is an important player in China’s management system of disaster prevention and mitigation.
II. Overview of China’s Disaster Prevention and Mitigation Management Audit
According to the timing and subject matters of post-disaster audits, China’s disaster prevention and mitigation management audit is generally divided into disaster relief audit and post-disaster recovery and reconstruction audit, both are on real time basis.
Disaster relief audit mainly targets funds and materials for disaster relief and its audit priorities include:
- - Whether disaster relief funds and materials are allocated timely and adequately for approved purpose only;
- - Whether they are subject to open, fair and just procurement, distribution and good management;
- - Whether they are used in compliance with laws and regulations;
- - Whether the donated funds and materials are received, transferred, managed and used in a standardized manner and are arranged openly and transparently with priority given to projects for which donators intend.
- - Whether the resettlement and relief of disaster victims, health and epidemic prevention, and fire safety are timely, proper, safe and reliable;
- - Whether living supplies are timely procured according to actual needs and funds and materials are efficiently distributed to disaster victims.
The post-disaster recovery and reconstruction audit mainly targets post-disaster recovery and reconstruction projects, and its audit priorities include:
- - The implementation and actual effect of government policies introduced to support post-disaster recovery and reconstruction;
- - Whether local governments have advanced post-disaster recovery and reconstruction according to plans;
- - Whether the funds from different sources are used and managed in compliance with relevant regulations;
In recent years, CNAO carried out recovery and reconstruction audits in Wenchuan and Yushu Earthquake stricken areas, and guided local audit institutions to conduct disaster relief and post-disaster recovery and reconstruction audits of Ludian Earthquake and Jinggu Earthquake in Yunan and the mudslide in Zhouqu, and revealed findings such as low performance and non-compliance. CNAO has played an important role in safeguarding the safe, compliant and effective use of disaster relief funds and materials, promoting the smooth implementation of post-disaster recovery and reconstruction and successful achievement of related objectives, among others.
III. Auditing Disaster Prevention and Mitigation Management
Taking into consideration of the urgency and toughness of disaster relief as well as heavy workload, huge investment, wide coverage, long duration and high social attention of post-disaster recovery and reconstruction, CNAO has modified its audit resource management mechanism and developed new audit approaches, through exploring use of new technologies and improved procedures.
Specifically, in the first place, CNAO has introduced a practice that is “oriented by audit institutions, participated by private sector auditing firms, and jointly supervised by relevant management departments” in which CNAO is responsible for unified guidance and overall coordination to strengthen coordination among audit institutions at different levels. For example, after earthquakes struck Jinggu and Ludian, Yunnan Province, CNAO carried out real-time audits in the first instance, requiring local audit institutions at all levels to actively implement real-time audits on earthquake relief and post-disaster recovery and reconstruction. Experienced professionals in post-disaster reconstruction real-time audit were sent on-site to work out an audit work plan with the local audit institution and establish a routine work contact mechanism to strengthen regular guidance of real-time audit. Local audit institutions at all levels, according to the staged key work in earthquake relief and post-disaster recovery and reconstruction, conducted real-time audits on funds and supplies for relief, rehabilitation and reconstruction projects, funds management and other audit priorities. Meanwhile CNAO, facing a shortage of manpower, has engaged private auditors and external experts in disaster prevention and mitigation management audits to realize a whole-process real-time audit. In this process, CNAO has strengthened its cooperation with discipline inspection and supervision, finance, development and reform, housing construction and other relevant departments to form an oversight synergy. For example, in the post-Lushan Earthquake rehabilitation and reconstruction audit, a joint inspection team consisting of the above departments was formed to conduct a centralized inspection of the worst-hit areas and to handle the problems discovered in an efficient and effective manner.
In the second place, a whole-process real-time audit features earlier audit involvement and combination of concurrent and ex-post audit. It enables an audit institution’s act of dynamic and continuous whole-process audit on budget execution, final accounts and related construction and management activities and investment performance of the construction project from commencement to completion according to law. It has four main characteristics: The first is prevention. Its biggest highlight is to install in advance external monitoring at all stages of project construction such as preparation, implementation and delivery. It focuses not only on the project construction result, but also on important work steps and matters in progress for early detection of tendencies and problems in project construction and management activities, and then make audit recommendations to promote regulated management and eliminate the defects that cannot be rectified timely and effectively even detected in ex-post audit, thus playing a preventive role in project construction implementation for the next stage. The second is timeliness. The whole-process real-time audit is synchronized with the subject matter, making mid-course corrections. It can detect problems through real-time monitoring of in-progress important steps and matters as early as possible; in a timely manner report the audit findings to the project construction management entity; urge timely and effective rectifications of the problems detected in audit. The third is sustainability. Ex-post audit is generally one-time and is somewhat limited in terms of the time available to conduct the audit and the audit objective. The whole-process real-time audit runs throughout the project construction including stages of preparation, implementation and delivery upon acceptance, featuring a long cycle and frequent on-site visits. Through continuous audits on project construction and management activities based on the project schedule with progressive audit objectives, it can ensure project construction to yield the expected goals and benefits. The fourth is extensiveness. The whole-process real-time audit is as across-the-board type of oversight. In addition to the authenticity and legality of revenues and expenditures, it also looks at the implementation of major policies and measures, construction progress, fund management, project construction quality, ecological and environmental protection, project final accounts, investment performance, among others. Focusing on both the process and the result, it contains broader and more comprehensive contents.
In the third place, CNAO has actively explored new technologies and methods for audit. It has increased the technical content and technological support of auditing and improved the quality and efficiency of audit by closely combining new practices with modern engineering construction, information and intelligence technologies and promoting the application of new technologies and methods such as non-destructive detection and geographic information systems. For example, using non-destructive testing equipment such as geological radar and steel scanner, auditors discovered such problems as jerry-building and hidden quality and safety hazards without damaging the construction works by auditing completed works and underground works. For another example, CNAO discovered problems such as false reports of quantities and illegal land acquisition by auditing the quantities of construction projects with new technologies such as ArcGIS, RS and GPS. The auditors also found problems of subcontracting of the project to unqualified construction entities and fraudulent access to compensation payments through data analytic techniques such as verification, clustering and correlation analysis of data. Recently, CNAO is exploring to further enhance the quality and efficiency of disaster prevention and mitigation management audit with new technologies and methods such as BIM and AI.
The audit effect should ultimately be reflected in rectification, so without solving the problems revealed, the audit could be useless. In line with the principle that “the one responsible for auditing shall be responsible for urging rectification”, CNAO has established a mechanism to follow up the real-time audit and timely urge audited entities to make due rectification and disclose the findings that have not been rectified, falsely rectified or insufficiently rectified. For example, in the post-Lushan Earthquake rehabilitation and reconstruction audit, the audit institution established an audit findings checklist and a rectification checklist, and monitored the rectification by sub-item tracking and overall review, so as to implement rectifications in place. Besides, the audit institutions at all levels in the disaster area were required to combine the post-earthquake rehabilitation and reconstruction real-time audit with the real-time audit of major national policy measures, and make key return visits and retrospect major problems and problems under rectification in each staged real-time audit to maximize audit effectiveness and promote the rectification of all problems discovered.
Audit is a powerful tool to ensure the safety of disaster relief funds and promote the implementation of reconstruction tasks. CNAO has gained a lot of learning in response to major natural disasters and public emergencies, and formulated some disaster prevention and mitigation management audit methods and oversight models with Chinese characteristics. Further, the post-disaster emergency phase features high suddenness and devastation. In specific situations, the conflict between shortage of manpower and heavy workload as well as the need for further standardization of relevant audit practices have also put forward higher requirements for audit work, requiring CNAO to continuously strengthen study and research, and explore the application of new technologies and methods.