A Study On Audit Of Investment And Financing Platform Of Local Government

In1990s, most regions have initiated the investment and financing platform of local government (IFPOLG), along with China’s rapid economic development and urbanization process, in order to survive with urban infrastructure construction capital bottlenecks and legal obstacles of national prohibition to local government debt financing. The IFPOLG has played a positive role in promoting the development of urban infrastructure and public utilities. By the end of2008, confronting to the international financial crisis, China began to implement a proactive fiscal policy and moderately loose monetary policy to stimulate the economy. Ministries encouraged local governments to further focus resources by fully carrying out the establishment of IFPOLG, strengthened IFPOLG functions in economic recovery. IFPOLG started its rapid expansion. However, the financial risks of IFPOLG accumulated, and formed potential threats to national economic security.National Audit office organized a comprehensive audit of local government debt per Central and State Council’s requirements in the first half year of2011. The audit findings showed that as of the end of2010, the number of IFPOLG in provincial, municipal and county levels amounted to6576, IFPOLG debt balance was over4.97trillion yuan, accounting for46.38%of the balance of total local government debt. The auditing revealed that part of IFPOLG was engaged in sub-standardized management, poor profitability, false capital contribution, registered capital out of place, violations of local government capital injection, the flight of capital etc.For years, the IFPOLG was a great hand in local infrastructure and public utilities development. However, after years of unrestrained and sub-standard operation, part of IFPOLG had accumulated significant risk. Therefore, national audit plays as an "immune system" would regulate the behavior of IFPOLG, enabling them to guarding against and defusing the risk of government debt to protect national economic security, which is a hot issue during current academicals and practices.In order to have a thorough understanding of IFPOLG auditing, organizing the literature, studying on the connotation of IFPOLG, development status and risk; based on the existing literatures, trying to implement the ideas of modern risk-based audit model into IFPOLG auditing. Finally, according to current situation of IFPOLG auditing, policy suggestions would be giving in standardizing and improving IFPOLG auditing.This thesis consists of seven chapters:Chapter1:this chapter outlines the research background and objectives, introduce the contributions and shortcomings, it plans the research frame and writing arrangements.Chapter2is the literature review. This chapter focuses on4parts:the reasons for building IFPOLG, characteristics, risk of IFPOLG, local debt and IFPOLG audits. Summarizing and commenting domestic research shortcomings. This chapter points out research opportunities, which is the premise of this study.Chapter3is theory on auditing IFPOLG. This part illustrates the necessity of IFPOLG auditing and the advantage of adding risk-based audit model into IFPOLG auditing. This part is played as the theoretical foundation of this study.Chapter4is the overview of IFPOLG’s development, current status and risk assessment. This part starts with the study into IFPOLG connotation, characteristics, functions and reasons of rapid development, and then reveals the current developing status of IFPOLG, last the risk assessment.Chapter5is the analysis into IFPOLG auditing reports. Filing and arranging the2011IFPOLG auditing reports, analyzing the national auditing about IFPOLG, trying to dig issues of the IFPOLG’s management and IFPOLG auditing.Chapter6is policy suggestion on IFPOLG auditing. On the basis of chapter5, the summarizing ideas about IFPOLG auditing, with the concept of risk-oriented audit, chapter6tries to design the procedures of IFPOLG risk-oriented audit mode, and auditing priorities and auditing methods of IFPOLG.Chapter7is research conclusions, innovations and contributions. With the reviewing of this whole paper, this chapter provides policy advice for improving IFPOLG auditing and preventing risk of government debt, and summarized with the innovations and contributions.The main contributions of this paper are in the following three aspects:First, a new research perspective, there is a novelty and practical significance combining social hot issues with audit. Second, filing and sorting out the latest statistics of the audit office and local government financial audit report results; Third, doing a more comprehensive and profound analysis of the current development status of IFPOLG and IFPOLG auditing, carrying out a systematic study about the implementation of the modern risk-based audit into IFPOLG auditing.Inadequacies of this article:due to the special nature of and limited studies on the IFPOLG at home and abroad, it was hard to obtain comprehensive and useful information about them; with my competence is inadequate, it is predictable that the elaboration of my understanding is incomplete and immature.