The China of Chiang K'ai-Shek: A Political Study

by Paul Myron Anthony Linebarger

THE MINISTRY OF AUDIT:

The functions of audit, as performed by the Ministry of Audit, are founded upon the Auditing Act. The old Auditing Act, however, is too tradition-bound and therefore inconvenient. The necessity of revision is especially pressing in war-time. In the spring of 1938, the Ministry prepared a draft Act and submitted it to the Legislative Yüan. The latter adopted this and published a New Auditing Act. According to the New Auditing Act, the Ministry is charged with three functions of internal checking (interior auditing), auditing (post-auditing) and supervision. These functions include:

i. Supervision of the execution of the budgets;

ii. Scrutiny of orders of receipt and payment;

iii. Scrutiny of computations and balance sheets;

iv. Control of illegal or unfaithful conduct in financial affairs.

Two merits of the New Auditing Act should be mentioned. In the first place, emphasis has been laid upon visiting auditing. For instance, the work of internal checking is not limited to the supervision of the receipts and disbursements of the State Treasury by the scrutiny and indorsement of the receiving and paying orders; but even receiving and paying vouchers of Government offices have been made ineffective, unless scrutinized and indorsed by auditors stationed in the offices by the Ministry. Owing to the vastness of the area of China, and owing also to the limited number of workers available in this line, this system is not universally applicable. Only offices in which the work of receiving and paying is especially heavy find such auditors present. As for auditing, the Government offices were formerly obliged only to submit to the Ministry accounting reports which they themselves had prepared. It is different now. The New Act ordains that auditors should be sent out periodically by the Ministry to visit the Government offices and scrutinize their books and vouchers. Or in each year, some offices should be selected to be thus scrutinized. The duties of supervision were not clearly defined, but they now include the following items: (a) the supervision of the revenue and expenditures of the offices; (b) the scrutiny of cash, bills, and bonds in the offices; (c) the supervision of the construction of buildings and of the purchase or sale of the property attached to the offices; (d) the supervision of the drawing and repayment of bonds and the destruction of bonds returned; (e) joint-administration with the financial departments of other offices; and (f) the scrutiny of other administrative affairs related to finance.

Secondly, the New Auditing Act ordains that the Ministry of Audit is directly responsible for the auditing of financial affairs of the offices of different ranks of the Central Government, while that of the local governments is under the charge of local auditing offices, subordinate to the Ministry.

[A detailed narrative of the war-time work of the ministry is omitted.]

Before the outbreak of war, the Ministry had established auditing offices in the Provinces of Kiangsu, Chekiang, Hupeh, Shensi and Honan and in the city of Shanghai, and one sub-office for the Tientsin-Pukow Railway. The office of Shanghai concurrently took charge of the auditing affairs of the Nanking-Shanghai Railway; and that of Hupeh, the affairs of the Peiping-Hankow Railway. In 1938 the offices of Hunan, Kweichow and Szechwan were established. In July 1939, a conference of auditors was held in Chungking. All auditors sent out now returned to attend it. They reported on their work, assisted the auditors in the Ministry, and discussed with them the directions of war-time auditing. In October, Mr. Lin Yün-kai, the Minister of Audit, visited Szechwan, Shensi, Kansu, and Chinghai to inspect the audit work going on in Shensi and Szechwan and at the same time to examine the local financial conditions as a step toward the extension of the auditing system.

In the spring of 1939, the Ministry prepared "An Outline for the Execution of War-time Audits" which was passed and enacted by the Supreme National Defense Council. There are eleven items, to be carried out in several periods, in this outline. A part of them are required by the New Auditing Act, while the rest are the new work arising from the war. They are as follows:

a. Auditing prefectural [hsien] finance: A prefecture, on the authority of Dr. Sun Yat-sen's Constitution, is the unit of self-government; and whenever the self-government is accomplished, China becomes constitutional. This being the case, the prefectural finance actually concerns the future of the country and the people. Therefore, beginning from 1939, the Ministry introduced the auditing of prefectural finance. It ordered the provincial offices to have the prefectures make monthly reports on their revenue and expenditure. The reports should be submitted to the provincial auditing offices which will also send out delegates to scrutinize the accounting records of some selected prefectures as well as to investigate the prefectural financial organizations, the taxation system, and the sorts of taxes. Up to June 1940, there have been 84 prefectures selected for such investigation.

b. The auditing of the Central Government Offices in the provinces and cities where no auditing offices have been established: In such cases, the Ministry has appointed the auditing offices of neighboring localities to take charge. But the Ministry has taken over the auditing affairs of Chungking for the moment. Meantime, plans have been made to establish auditing offices in Kwangsi, Fukien, etc.

c. The auditing of the receipts and disbursements of public treasuries: Since October 1939, when the Public Treasury Act came into force, the Ministry has sent delegates to the State Treasury Bureau to scrutinize and indorse the accounting vouchers, and the provincial offices have sent delegates to Provincial Treasuries as well.

d. The auditing of special funds: As a rule, the institutes in charge of special funds have from time to time submitted their reports on their receipts and disbursements to the Ministry. Since 1939, the Ministry has also sent delegates to examine strictly these funds.

e. Itinerant auditing: The present economic conditions do not permit the Ministry to establish auditing offices in all the government-owned concerns. But itinerant auditing, after the model of circuit courts, has been introduced since 1939. The Suchow-Kunming and Yünnan-Burma Railways have been thus examined. The provincial offices have also applied this system to the business offices.

f. The visiting auditing: The system of visiting auditing has been developed gradually. Delegates have been stationed in Sufferers' Relief Committee, City Government of Chungking, Ministry of Finance, Ministry of Economics, and Ministry of Communications. Other delegates have been sent out to visit some selected offices who have submitted their accounting reports.

g. The supervision of the revenue of government offices: Salt Tax and Commodities Tax have been scrutinized.

h. The supervision of clothing, provisions, and other military supplies: Since the outbreak of war, the amount of clothing, provisions, etc. purchased by the military authorities has greatly increased. The delegates from the Ministry are always present on the occasions of signing contracts, announcing the bids, deciding the winning bidder, and delivering the goods. If the supplies are purchased in the provinces, the provincial offices are in charge of the supervision.

i. The supervision of mass purchase and constructions: The delegates from the Ministry or its provincial offices are always present on the occasions of signing contracts, announcing the bids, deciding the winning bidder, and delivering the goods or completing constructions when there are any mass purchases or sales of government-owned property or any construction work.

j. The financial scrutiny of the war-time provisional organizations: There are huge sums of receipts and disbursements in such organizations as the "Joint Emergency Air Raid Relief Office of Chungking" and the general office of the "National Committee for Soldiers' Comfort," so that their auditing affairs are made the charge of the delegates from the Ministry.

k. The supervision of the payment, preservation, and usage of contributions of all sorts: National Salvation Bonds, Aviation Contribution, and all other contributions donated by the Chinese at home and abroad have been scrutinized by the Ministry delegates.

Many considerable results have been achieved since the execution of the above items from January 1939, to date. The "Auditing Plan for 1941" has already been prepared by the Ministry. When it is passed by the Supreme National Defense Council, it will come into force from January of next year.