The Commission of Audit (CA) released the audit report of “Subsidies Granted by Macau Foundation to Associations” in June 2012, which provided audit opinions and suggestions on the audit findings related to the approval, disbursement and monitoring of subsidies. In this audit, CA selected audit findings related to the supervision of subsidies to follow up, including “Monitoring the obligation of subsidies recipients to submit activity reports and the imposition of sanctions on violators” and “Follow-up and supervision after granting the subsidies”.
Given that the amount of subsidy granted by the Macau Foundation (hereinafter referred to as “the Foundation”) to associations had been a significant increase annually from 855 million patacas in 2012 to 2.222 billion patacas in 2018, and the proper use of subsidies depended on whether the foundation implemented strict supervision. Therefore, CA followed up the improvements of the two audit findings in the previous report and explored whether the measures established by the Foundation could effectively monitor the application of subsidies in order to ensure their proper use. In the recently released performance audit report of “Effects of Previous Audit Reports – Subsidies Granted by Macau Foundation to Associations”, CA had a deep analysis in the Foundation’s work regarding to the improvement of monitoring the subsidies of associations, and the results showed that from the publication of previous report in June 2012 to December 2018, the improvements of the related work were unsatisfactory.
The audit result pointed out that the hearing procedure introduced in 2014 by the Foundation is imperfect, so the staff 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 Foundation rarely initiated the hearing procedure and also did not impose sanctions in all those cases as required by the regulations. 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.
Regarding the follow-up and supervision after granting the subsidies, the Foundation, in response to the audit report released in June 2012, stated that only a rigorous audit can guarantee the authenticity of the reports submitted by the beneficiaries. In this follow-up audit, the Foundation stated that since the related audit criteria are still formulating, it did not hire auditors to audit the accounts of subsidized activities from the publication of audit report in June 2012 to August 2019. Instead, two supervisory measures were approved in June 2015 according to the Foundation: the beneficiaries who receive large amounts of subsidies were encouraged to hire auditors to audit their accounts; and the random check on the receipts of income and expenses of those who receive small amounts of 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. 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.
In the written response to the audit report, the Foundation indicated that since the publication of the report in 2012, it has taken many improvement measures. According to the information from 2015 to 2018, those who submitted the report on time (78.2%) and those who submitted the report within 30 days after the deadline (14.2%) reached 92.4%, and only a few beneficiaries failed to fulfill the obligation. Therefore, the Foundation considered that the situation of fulfilling the obligation of submitting report has been greatly improved. In this connection, CA pointed out in the general comments that when the Foundation counted the cases that beneficiaries submitted reports within 30 days after the deadline together with the cases that beneficiaries submitted reports on time, and then concluded that over 90% of beneficiaries collaborated in the work of the Foundation, this calculation method and judgement were inappropriate. According to the audit results, between 2015 and 2018, more than 20% of beneficiaries submitted their report late every year, with the total number of overdue cases was 788, involving an amount of 2.091 billion patacas, and some overdue cases even did not submit reports for more than two years. The purpose of this audit is to assist auditees to find out their deficiencies, and to recognize the problems that were not fully improved after the previous audit. Based on the principle of prudent use of public funds, the Foundation should review each of related problems instead of considering that they have been largely improved. In order to properly solve these problems that have existed for many years, the Foundation must make improvement with a serious and responsible attitude to ensure that billions of dollars of subsidies granted annually are properly monitored and used.
The report was previously submitted to the Chief Executive and it can be downloaded from the Commission of Audit’s website (http://www.ca.gov.mo), also it is freely available at the Commission of Audit Office from today during office hours.
