Jingrong He

Procurement Specialist, Solutions and Innovations in Procurement, Governance Global Practice


Supreme Audit Institutions (SAI) for Bank financed projects have carried out financial and procurement audits. In Poland, this initially started more than a decade ago and there have been several other examples over the past years in other countries.

By the end of FY16, China National Audit Office (CNAO), the SAI in China, had successfully completed its third year of integrated financial and procurement audits for 27 Bank financed projects and accounting for 28% of the total active portfolio of China. This is a big leap from only 3 projects in the first year of FY14.

Rome was not built in a day. CNAO has been the external auditor of all Bank-financed projects in China since 1984. It conducts project audits in accordance with the Government Auditing Standards of the P.R. China and the International Standards on Auditing. The Foreign Funds Application Audit Department and the Audit Service Center of CNAO, and the Provincial Audit Institutions conduct audits on Bank financed projects and issue the audit reports in their names. There are about 120-130 financial audit reports submitted to the Bank every year. CNAO's audit reports not only include the auditor's opinion on project financial statements, they also include opinions on procurement compliance as this is an important aspect of the review of the eligibility of expenditures. This procedure is in full compliance with the Audit Law of P. R. China, which requires auditing of authenticity, legality and beneficial results of the budgetary revenues and expenditures or financial revenues and expenditures of public funds. It was under this context that in FY 14, we started piloting the use of CNAO for integrated financial and procurement audits in some Bank-financed projects.

A good start is half way to success. To help auditors have a good start, the Bank procurement team of Beijing conducted several procurement training workshops for CNAO staff. These learning events were very helpful and served not only to equip auditors with sound knowledge on Bank procedures but also to clarify concerns and exchange experiences. At the beginning of FY16, before audit processes are launched, CNAO and the Bank reached an agreement on the audit scope, reporting format, sampling rate and hands-on support arrangements. In the first year of review, auditors expressed their concerns about (i) the heavy workload in some rural projects with hundreds of contracts for review; (ii) reluctance to assess procurement risk in the report as they were not familiar with the project as a whole; and (iii) complexity of the procurement review template. These concerns were jointly considered, discussed and appropriately resolved with efforts from both sides. Currently, CNAO audit reports are a very good source of project's procurement information and are in full compliance with the Bank's procurement post review requirements.

Meeting and learning from a practitioner

Meeting and learning from a practitioner. The World Bank's China and Poland Offices organized a study tour to Poland. On September 12th, 2016; a CNAO delegation visited NIK, the Supreme Audit Institution of Poland. NIK started integrated financial and procurement auditing since 2004 and has substantial experience in this area. This study tour served as an avenue for CNAO to exchange knowledge with their Polish counterparts on methodology, sampling, systems, findings and recommendations. This was an enriching experience for both parties and marked the start to a great long term relationship. Two audit institutions agreed to continue sharing information after the visit.

In FY16, CNAO reviewed 359 contracts of various procurement methods with a total value of about US$ 148 million. This is an excellent example of using country systems under Bank financed operations. It also helped CNAO to enhance its internal capacity. This is a successful collaboration which has had mutual benefits; the World Bank team and CNAO have agreed to collaborate further as well as expand the scope for FY17.

For more information, please contact Elmas Arisoy, Manager, East Asia and Pacific Region, Solutions and Innovations in Procurement, Governance GP