A Study On The "Private Coffer" In China

"Private coffer" is informal but widely used, which means the capital (including negotiable securities) and the assets that should be included in the institutions'valid books but is not included in the valid books, according to the Accounting Law of China. It's also formally called "additional assets account", "false account", "capital assets account", etc.It has existed for a long time that the CPC and government organs, public institutions, and state-owned enterprises secretly owned private coffers in China, which has negative effects on the economic development, society's harmony and stability, and even the whole country's development. Based on the three nationwide campaigns against "private coffer", this dissertation analyzed the characters of the private coffer existed in different institutions separately. The author analyzed the origin of private coffer in the CPC and government organs from the perspective of financial system, and the root reason for private coffer set by the state-owned enterprises from the aspects of property right system and internal incentive and constraint system. Accordingly, the dissertation provided with policy suggestions for prevention and control of private coffer.Since 1978, China has launched three campaigns against the private coffer in a nation wide in 1989,1995, and 2009 respectively, with different background and objectives each time. In the third time, the task force on prevention and control of private coffer is under the background that the economy grows fast, the financial revenue increases stably and significant progress has been made in social undertakings. The author holds the opinion that, the third campaign against the private coffer focused on examining and eliminating the corruption problem resulted from the private coffer, improving and perfecting the relative system, and making foundation for the economic development and social harmony, and is different from the previous two campaigns that focused on examining and complementing financial revenue.The dissertation focused on the latest campaign against the private coffer that was launched in 2009-2011. Based on the statistical analysis on the data of the 3 years, it is founded that, in terms of the governments'administrative institutions, most of the private coffers exist in the basic units that are under the city and county level, the capital mainly comes from property rental revenue, and arbitrary charges and fines, etc, and the money is mainly used for complementing operation expenditures and expenditures on receptions. As for the governments'administrative institutions at the provincial level or above, the capital mainly comes from the property rental revenue and the obtained funds by listing false expenditure, etc, and the money is mainly used for granting subsidies and allowances. This phenomenon resulted from the current tax-sharing fiscal system that leads to the financial revenue being aggregated in the upper-level institutions, while most of the tasks being undertaken by the lower-level institutions. To prevent the administrative institutions from setting private coffer completely, it is necessary to further improve the financial system below the provincial level, and financial transfer payment system, and establish a financial system that the financial right matches the task right, within the framework of tax-sharing fiscal system, and to guarantee the basic unit's expenditure with better system. As for the provincial administrative institutions or above, it is necessary to make a more scientific and detailed budget, to guarantee the operation expenditure to implement their function at the one hand, and prevent them from being luxury due to having additional expenditures on the other hand.As for the state-owned enterprises, generally there are comparatively fewer private coffers in the financial enterprises. It is mainly the branch financial institutions that have private coffers which generate funds by making false lists of expenditure. The funds of the private coffers are mainly used to pay processing fees illegally and pay additional fees to VIP clients. This is because the branch institutions'income resources have been cut off, since the Examination of Accounting Business is implemented in financial business. The non-financial state-owned enterprises'problem of setting private coffers is more serious, and there existed interception of income, false lists of expenditures, etc. The funds of the private coffer are mainly used to provide welfare for the employees, and keep relationship with clients. This is because the employees'salary mainly depends on their performance bonuses due to the joint-stock system reform in state-owned enterprises, which make the branch institutions pay the clients illegally so as to extend their business and thus to achieve their performance appraisal goal, and finally to increase their own profit. Also, it's comparatively more hidden and safer to obtain business profit by paying clients than granting the private coffers'funds to the employees directly. Accordingly, the dissertation suggested developing long-effect mechanism to prevent and control private coffer by further perfecting the governance structure of state-owned enterprises, establishing and improving the internal control system, and increasing the fines on setting private coffers.With regard of the problems related to "Private Coffer", there has been little systematic research on it through the perspective of Economics till now in China. Therefore, this dissertation systematically studied the problem of Chinese "Private Coffer " with the perspective of Principle-agent theory and Institute Economic theory for the first time, and points out that there indeed exist multiple principle-agent relationships among the people, state and government, for example, people entrust the state to manage public affairs and provide public good and social service; the central government entrusts the local governments at all levels to realize their management function. Therefore, various principle-agent relationships have come into being, say from top to down, and from down to up. Among these relationships, due to the unbalance of information, it's inevitable that agent problem appeared when governments perform their functions, which is regarded as the root reason of s Private Coffer problem. As the local governments are at the end of the principle-agent chain, the problem of information unbalance is more serious and thus the problem of Private Coffer is more aggravating, too. It would be helpful to prevent and eliminate the problem of principle agent to improve and perfect the related institutions and system, which has been proved by the practice of controlling small coffers in China. The problem of Private Coffer has been gradually eliminated due to the reform of fiscal management system and property right system in China in recent years. The dissertation suggests that in order to eradicate the problem of Private Coffer, it's necessary to further perfect the fiscal management system so as to reduce the probability of corruption, strengthen supervision to increase the probability of corruption exposure, and increase punishment to enlarge the negative effects of corruption.