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No.13 of 2016 (General Serial No. 244):The Audit Results of the Financial Revenues and Expenditures of China Electronics Technology Group Corporation
2017-06-08日   Soure : 【www.9455.com:International Cooperation Department】 :

No.13 of 2016 (General Serial No. 244):

The Audit Results of the Financial Revenues and Expenditures of China Electronics Technology Group Corporation and Technology  Group Corporation for the Year 2014

In accordance with the stipulations of The Audit Law of the People’s Republic of China, the National Audit Office of China (CNAO) conducted auditing on the situation of financial revenues and expenditures of the year 2014 of China Electronics Technology Group Corporation (CETC) in 2015 . The audit focused on the headquarters of CETC and other 24 secondary units including the 14th and 38th Research Institutions of CETC (hereinafter referred to as the 14th Research Institution and 38th Research Institution), and made follow-on and retroactive efforts on relevant items.

I. Overview

CETC was founded in March 2002. Its main business includes electronic equipment manufacturing, software development and application, electronic technology research and services and so on. As reflected in the consolidated financial statement by the end of 2014, CETC had possessed 476 wholly-owned or holding subsidiaries, 58 joint- stock companiesand 47 scientific research institutions and had RMB5.775 billion of registered capital. The total assets had amounted to RMB187.671 billion, the total liabilities had reached RMB85.791 billion and there was RMB101.88 billion worth of owners’ equity. The asset-liability ratio was 45.71%. The realized operating revenue of the same year was RMB129.361 billion and a net profit of RMB11.018 billion was earned. The return on equity was 11.74%, and the rate of the value maintenance and value increase of state-owned capital was 111.75%.

Zhong Huan Hai Hua Accounting Firm, entrusted by CETC, audited the consolidated financial statement of 2014 of the Corporation and issued a standard and unqualified audit report. The report was published on ChinaMoney.com.cn.

The CNAO’s audit results indicated that CETC focused on 5 main business areas including electronic industry, science and technology innovation, international operation, asset management and capital operation, mainly developed safety electronics, software and information services, emphasized on the fundamental and forward-looking technology research, made medium or long-term planning and innovation, improved the electronic information equipment research and manufacturing ability, strengthened cost control and operation management. The audit results also demonstrated that some problems have still existed in fields such as financial management, accounting, important corporate decision- making and management, development potential, professional ethics, reform and rectification of problems found in previous years of CETC.

II. Main Problems Found in the Audit

(I) On financial management and accounting

uIn the combined financial statement of 2014, because the Corporation made intra-group transactions and failed to fully offset in such activities, CETC overstated RMB734 million assets and RMB734 million liabilities respectively, overstated RMB2.173 billion revenues and RMB1.974 billion costs respectively, and overstated RMB199 million profit.

u From 2011 to 2014, the headquarters of CETC had irregularly disbursed RMB50.5355 million administration expenses for staff commercial insurance, of which the amount of RMB2.5276 million was in 2014.

u From 2011 to 2014, eight units including the affiliated 48th Research Institution had falsely increased RMB2.041 billion income and RMB 1.907 billion costs by signing fake contracts, of which the falsely increased income of 2014 was RMB 579 million and falsely increased costs of 2014 was RMB 579 million.

uFrom 2011 to 2014, ten units including the affiliated 38th Research Institution, in the name of meal expenses and holiday allowance, had disbursed a total amount of RMB494 million salaries, bonuses, and subsidies from administration expenses in excess of the total salary. Among that the amount of RMB87 million was in 2014.

u In 2014, three units including the affiliated 14th Research Institution failed to verify the income and costs in accordance with the accrual basis, resulting in an understatement of RMB320 million income and RMB179 million costs respectively.

u From 2011 to 2015, the headquarters of CETC and some sub-units had listed disbursement items falsely by fabricating businesses, through which they provided RMB19.2083 million welfare for the staffs, of which the amount of RMB2.2753 million was in 2014.

u From 2012 to 2014, the affiliated 18th Research Institution had failed to change the projects under construction into fixed assets, resulting in an under-accrual of RMB12.4619 million of depreciation, of which the amount of RMB4.8289 million was in 2014.

u In May 2012, the affiliated 15th Research Institution irregularly disbursed RMB1 million as performance support funds from science research costs.

(II) On important corporate decision- making and management

u From 2012 to 2013, CETC had approved its sub-units to build plants and purchase lands without a feasibility study, involving a total amount of investment of RMB2.319 billion, of which RMB133 million assets from investment was in idleness.

u From 2011 to 2014, five units including the sub-unit China Electronics Haikang Group Limited Corporation had irregularly invested in eight projects without asking for approval of the Group, involving RMB1.696 billion, of which the amount of 42 million was in 2014.

u From 2011 to 2013, two units including the sub-unit Hebei Far East Communication System Project Limited Corporation had irregularly lent out RMB217 million without approval of the Group, of which RMB109 million was facing a risk of loss.

u From 2011 to 2012, two units including the sub-unit China Electronics Haikang Group Limited Corporation had invested in two projects including purchasing stock rights without assets appraisal or filing, involving RMB129 million.

u By the end of 2014, two units including the affiliated 13th Research Institution had failed to retrieve the RMB72.5888 million house-purchasing payments in advance for the staffs. From 2011 to 2014, three units including the affiliated 38th irregularly had disbursed RMB68.5659 million house-purchasing allowance to the staffs, of which the amount of RMB54.9852 million was in 2014.

u From 2011 to 2014, three units including the affiliated 13th Research Institution had transferred state-owned lands to four staff share-holding companies without asset appraisal, resulting in a loss of RMB3.1452million, contracted RMB98.5862 million of business to staff share-holding companies without doing bidding, and irregularly quit the pre-emptive rights of 1.236 million shares (initial contribution of capital being RMB1.8787 million) of staff stocks.

u From 2011 to 2014, five units including the affiliated 28th Research Institution had colluded to bid, lend out qualification and paid more construction fee, involving RMB40.71 million, of which the amount of  RMB7.7909 million was in 2014.

u From February to May in 2015, the affiliated 47th Research Institution had changed the bills of irregular business entertainment expenses and the likes, hid or destroyed the original invoices, involving RMB322.5 thousand. After the payment, the Institution altered the accounting vouchers of the financial system of 2014 and made new serial numbers without keeping the modification records, involving 43 accounting vouchers.

u By the end of 2012, the affiliated 15th Research Institution had paid RMB1 million to outside units and bought three technology research reports. It was not applied in relevant projects and most part of the reports were actually downloaded from the Internet.

u By the end of 2014, CETC had not set up competent department for centralized management of material procurement in accordance with the rules, had not set up a centralized material procurement management system and had not set up or completed the evaluation system of post-project investment.

u CETC in its information construction had problems such as not making a medium and long term planning for information construction, construction of finance integration project lagging behind and so on.

(III) On Development Potential

u From 2009 to 2010, two units including the sub-unit Hunan Red Sun New Energy Technology Limited Corporation had not studied the qualification and credibility of the buyers, nor gone through the normal contract appraisal process and sighed the export trading agreements totaling RMB660 million. Furthermore, the companies started to provide products before receiving the payment and without full guarantee from the buyers. By May 2015, RMB371 million loans had failed to be recovered, facing a risk of loss.

uFrom 2011 to 2015, four units including the affiliated 54th Research Institution had irregularly lent out money, made advance payment of projects’ settlement for others and provided external guarantees, involving RMB88.2707 million, of which the amount of RMB41.6386 million was in 2014.

(IV) On Professional Ethics

u From 2011 to 2015, the headquarters of CETC and some sub-units had extracted funds through listing false disbursement to be used as reception expenses etc., of which RMB76.6254 million were disbursed after the Eight Rules were already issued by the Central Government.

u From 2011 to 2014, six mid and high- level leaders of the headquarters of CETC and some subunits had irregularly received RMB28.0931 million house-purchasing subsidies for cadres rotating across regions, of which the amount of RMB3.3004 million was in 2014.

u By June 2015, nineteen mid and high-level leaders of two units including the affiliated 13th Research Institution had not repaid the stocks of the affiliated companies in accordance with regulations, involving RMB43.5684 million.

u From 2011 to 2014, three leaders of three units including the affiliated 38th Research Institution had irregularly held two or more posts concurrently and got paid and 4 persons had irregularly visited foreign cities beyond the range of stipulated inspection tour at public funds, involving RMB1.4411 million, of which the amount of RMB199.4 thousand was in 2014.

(V) Rectification of Issues Found in Audits of Previous Years

As reflected in the auditing of 2011, 52 mid and high- level leaders of the affiliated 41st Research Institution irregularly held RMB2.4243 million of stock rights of four affiliated companies and had not returned them completely until June 2015.

III. Audit Measures and Rectification

Regarding to issues discovered through auditing, the National Audit Office has submitted audit reports and released letters of audit decisions in accordance with laws. CETC will notify the general public of the details of the straightening and rectification situation.

Clues related to issues in violation of laws and disciplines discovered through the audit this time have been legally transferred to departments concerned to be further investigated and dealt with.

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