The Performance Eveluation Through Auditing On The Projects Financed By Government Foreign Debts Of China

Projects financed by government foreign debts mean that governments at each level borrow funds from international financial organizations and foreign governments to invest in infrastructure construction and social development. These projects in china benefit nearly all industries and social sections. The financial and economic conditions of the country were out of order at the beginning of the reform and opening up, so a great deal of funds was badly needed for economic and social development. Therefore, loans from World Bank and Asian Development Bank became the main source of China's external capital. Loans lent by international financial organizations and foreign governments are borrowed by the Ministry of Finance (MOF) on behalf of central government and re - lend to local governments or to project units layer by layer, and then MOF would repay them in a lump. Under this circumstance, these loans were called government foreign debts. By the end of 2005, national accumulative total of the projects financed by government foreign debts have summed to 3, 549, with $ 125. 1 billion in agreement and $69. 42billion liability balance. The total investment in these projects would reach up to nearly ï¿¥2, 000 billion If Counterpart Financing included.The benefits of and impacts on economical and social development of governmental foreign debts gradually turn into an issue people concerned. Whether government should borrow a great deal of loans from abroad? Whether decisions making on these projects are right? Whether these projects would be value for money? What is a good way of evaluating the projects' performance and function of them to the economical and social development? What kind of experience and lessons can be learned, and whether government will continue to borrow foreign loans? Government at each level and the whole society call for proper answers to these questions beyond. Reviewing the process of construction, operation and management of the projects in past twenty years, studying on experience and lessons learned from these projects and performance evaluation methods, analyzing about China' willingness of continuing to borrow foreign loans, will furnish significant study and promoting values to grand system reform ofadministration system, investment system, budgeting system and the perfection of foreign debts projects' management and effectiveness.World Bank is the first international organization executing post evaluation of projects. It has formed sound system, standards and methods of post evaluation. It reckons that China's loan projects are very successful, appraised no matter macro-scopically or microcosmically. China as a debtor enjoys good reputation of high -quality projects and credit standing repayment record in the world. China' loan projects selected to be successful model have been popularized to other parts of the world. The State Situation Study Center run by Chinese Academy of Science and Ts-inghua University with Professor Hu Angang as its leader gathers a group of elites in China, which ensures it acquiring rich scientific research resources. It was carried out a post evaluation to projects sponsored by the Ministry of Finance, which turned to be a success. It concludes that loans from international financial organizations playing three important roles and making six contributions in China, namely Seed effect, Model effect and Catalyzing effect; Concept of developing contribution, investment push contribution, infrastructure construction contribution, poverty reducing contribution, knowledge and system promoting contribution and sustainable development contribution.China National Audit Office (CNAO) and other audit agencies of all levels began to take on the task of auditing loan projects of World Bank in 1984 and provide certification audit reports externally. In recent years, they enforced performance audit of completed projects financed by government foreign debts. The audit purpose and audit methods possessed by CNAO are different from others.The projects financed by government foreign debts have made accomplishments to some extent; however, some existing serious problems audited by CNAO, such as breaking up project contracts, losing and wasting, inefficiency and incomplete management have affected good utility of project funds and project goals. What is worse, due to defects in the investment management system and governmental foreign debts management system, some projects could not afford to pay back loans or even shifted off loans deliberately. Many municipal and county governments had to shoulder the responsibility of repaying these heavy loansThis paper attempts to make comparative analysis in auditing methods, evaluating index system and results of post evaluation manifested in World Bank loan projects carried out by World Bank, the State Situation Study Center and performance audit by CNAO. This paper also tries to sum up sameness and characteristics among them and strong points they can learn from others' to improve themselves. These conclusions would make post evaluation and performance audit more effective, subjective and constructive. They will also attract governments of all levels more attention to the effectiveness and making it be scientific, systematic and standard. of investment decision - making, borrowing and using of foreign loans and project management.The author has worked in CNAO for a long time and has being in charge of auditing of foreign funds using. In the long - term work experiences, the author has his personal feeling that it is very necessary and essential to reform and innovate the procedures and methods of executive administration, considering from the aspects of system and institution. The author has presided over some important audit activities such as auditing the management and using of government foreign debts, performance auditing on the loan projects of World Bank and Asian Development Bank. He organizes personnel to constitute audit execution schemes, evaluation index system and investigation questionnaire. Besides, he also commands the composing of all auditing reports and auditing investigation reports. The research of this paper is based on substantive and accurate first - hand materials and comprehensive documents. Theory of foreign debts, theory of performance audit and theory of post evaluation of projects home and abroad are covered in its chapters. It introduces many research methods, such as document study, comparative study, cases study, statistics study, questionnaire investigation, sample auditing, etc. through which all - round investigation materials and statistics data were collected. Plentiful cases on hand were packed up, analyzed and colligated. Control theory, system theory and information theory were all used in deep research into management system, system arrangement and resource conformity of government foreign debts. Suggestions to investment management system, government debts management system and post evaluation management system are given out here. The structure of the paper presents as follows:Chapter 1 talks about the topic under discussion and research motive. It brieflyexplains research methods and structural arrangement of the main body.Chapter2 presents specifically domestic and overseas theory of foreign debts, theory of performance audit and theory of post evaluation, viewpoints from experts, files of public debts audit and performance audit of INTOSAI, concept and characteristic of government foreign debts projects. It introduces procedures, contents and methods of post evaluation of projects made by World Bank and the State Situation Study center run by Chinese Academy of Science and Tsinghua University. It probes into the differences between post evaluation of projects and performance audit.Chapter3 gives introduction and analysis about the operational process of government foreign debts projects, including existing problems in current government foreign debts management system and projects management system, and the necessity of post evaluation.Chapter4 presents background, process, methods, principles and reports of auditing on government foreign debts projects. It will stresses on probation of auditing model by using system theory, control theory and information principle.Chapter5 expounds common performance audit methods of government foreign debts projects, including audit procedure, audit scheme, audit subject selected, evaluation standards, audit methods and audit reports. It attaches importance to the characteristics, focuses and material technologic methods of performance audit on these projects, furthermore, practical significance of enforcement of this kind of performance audit.Chapter6 makes demonstrative analysis of three selected performance audit cases of government foreign debts projects carried by CNAO in recent years. Audit ideas, audit procedures and audit results of these three cases are initiative and representative in government audit agencies national wide. It presents revelation obtained from these three cases and other audit processes, clarifies some promiscuous and neglected important concepts and conceives of establishment of normative and scientific system of government foreign debts management.Chapter7 selects several post - evaluation and performance audit cases of government foreign debts project carried out by World Bank, the State Situation Study Center and CNAO. It makes comparisons among them in aspects of evaluation index sys-tem, methods and results. It analyzes their advantages and defects respectively, and proves performance audit to be the most effective way to evaluate finished projects in character, status and function.Chapter8 makes a conclusive summary of research results, perspectives, inspirations and proposals scattered among every chapter above. Innovative arguments and theories under mentioned and prospect as well as themes about future research on performance audit and post evaluation of projects financed by government foreign debts.The author highlights several gists of arguments and theories bearing innovative value in this paper.Firstly, it systemically summarizes main perspectives of home and overseas theory of foreign debts, theory of performance audit and theory of post evaluation. It presents Chinese performance audit model in personal opinion and contends that the effectiveness of government foreign debts project will finally reflect on social benefit. Implementation of performance audit is required both by law and provision of scientific statecraft. Compliance audit is part of performance audit, Chinese features will be demonstrated on actual account - oriented and check of illegitimacy and violation - focused performance audit.Secondly, it systemically summarizes the audit process of government foreign debts project in audit agencies in China. It puts forward four methods of projects financed by government foreign debts and models of systemic audit, which have clarify the misunderstanding that foreign funds audit was known to slump in certification audit without achievements. It contends that the audit process is an audit system composed of audited body, subject, methods, information and reports. This audit system model might be guided by theory of system, theory of information and theory of control, in context with orderliness of audit of government foreign debts projects.Thirdly, it argues that performance audit is the most effective way to evaluate completed projects and government audit agencies are the main force executing post e-valuation. All evaluation methods have strong points and limitations, which enable them to learn from others' strong points and offset one's own weakness. Through demonstrative analysis towards three cases of performance audit, it suggests that procedure of performance audit could be divided into two kinds, process - oriented andresult - oriented, judged by different audit goals. The most prominent trait of performance audit reveals in the audit and evaluation of funds usage and repayment and borrowing of these projects.Fourthly, it sets up the theory of evaluation through auditing on the projects financed by government foreign debts and explains it in terms of definition, function, relations with methods of other post evaluation, audit procedure, audit scheme, auditing methods, and audit evaluation standard.Fifthly, it conceives the establishment of normative and scientific management system of government foreign debts projects. It discourses upon five aspects related to this proposal, including reasonable work division and planning as a whole and coordinating of central governing ministries, combination of government debts into government budgets of of all levels, business of re - lending government foreign loans and obligation of repayment fulfilled by banks, the perfection of the projects' investment decision - making system, government foreign debts projects auditing post evaluation and accountability system.