1.1 Audit results

1.1.1 Monitoring the obligation of subsidies recipients to submit activity reports and the imposition of sanctions on violators

The hearing procedure introduced in 2014 was imperfect since there was no stipulation about the specific time to initiate this procedure. As a result, the staff only continuously demanded the beneficiaries to submit the overdue reports, showing that they had discretion and arbitrariness in monitoring the submission of reports. From 2015 to 2018, about 20% of the beneficiaries did not submit their reports on time every year, and there were 788 overdue cases in this four years, involving a total amount of 2.091 billion patacas. Even though some reports were submitted with considerable delays, the Macau Foundation (hereinafter referred to as “the Foundation”) rarely initiated the hearing procedure and also did not impose sanctions in all those cases. In addition, during the follow-up process, it was found that some beneficiaries constantly submitted their reports late, but the Foundation never initiated the hearing and sanctioning procedures; on the contrary, it continued to approve the new subsidy application and granted the approved funds. This practice made the follow-up and punishment mechanism established in the “Internal Regulations on Criteria for Examining and Granting of Subsidies” become virtually non-existent. Although the Foundation introduced the restriction of granting the subsidies in phases in June 2018, it only postponed the granting time of subsidies for new projects, but it did not have a punitive or deterrent effect, failing to ensure that the beneficiaries could submit their reports before the stipulated time. Therefore, the result of improvement was unsatisfactory.

1.1.2 Follow-up and supervision after granting the subsidies

In June 2015, the Foundation encouraged the beneficiaries to hire auditors to conduct audit. The beneficiaries could make their own choice as to whether to employ auditors, and the service fees would be fully or partially subsidized by the Foundation. However, there were key problems in this practice, including: the failure to make the beneficiaries realize that the financial information they submitted had the possibility to be audited, so that they must report completely and truthfully; due to its voluntary nature without having binding effect, there was a low level of cooperation of beneficiaries in the past four years, with annual rate of submitting financial report being between 6% to 12%; only 1.6% of the reports could obtain a high level of assurance in the audit; the other reports were prepared in various forms, for example, the form of compilation and the procedures agreed upon by beneficiaries and auditors, so these reports were difficult to have a high level of assurance because of the quality and the sufficiency. Therefore, the audit work, both in terms of quality and quantity, could not effectively ensure the completeness and authenticity of the financial information of the projects that received large amounts of subsidies. In addition to the unsatisfactory implementation of external audit, it was found that when the Cooperation Division, which is responsible for monitoring the projects that receive large amounts of subsidies, verified the incomes and expenses reported by the beneficiaries , the inspection work was insufficient and incomplete, deviating from the demand of rigorous audit.

1.2 Audit Suggestions

The Foundation should:

strictly follow the “Internal Regulations on Criteria for Examining and Granting of Subsidies” and other relevant regulations, and take prompt action against the beneficiaries who failed to fulfill their obligations, such as the initiation of hearing procedure, the suspension of their right to apply subsidies and the demand to refund the subsidies granted.

change the current practice of beneficiaries deciding whether to hire auditors to audit their accounts, and take the initiative to select the beneficiaries as the audit object. Meanwhile, it should review the follow-up and audit work on the projects that received large amounts of subsidies, and improve the deficiencies to ensure the completeness and authenticity of the information reported in the activity reports.