TNAG-0620-FCO40-768-Annual-accounts-of-Hong-Kong-Government-for-year-ending-1976-1977 — Page 27

INTRODUCTION

The audit of the accounts of the Hong Kong Government is carried out under the terms of the Audit Ordinance (Cap. 122), which provides inter alia for the appointment, tenure of office, duties and powers of the Director of Audit, for the submission of annual statements by the Accountant General, for the examination and audit of those statements by the Director of Audit, and for the submission of his report thereon to the Governor. The statements, signed by the Director of Accounting Services and as required by Section 11 of the Audit Ordinance rendered by the Accountant General, were received within the statutory period prescribed and except as stated herein have been examined and audited in accordance with the Ordinance.

2. Scope of Audit. The audit is carried out in accordance with a programme of work which is determined annually and which is intended to provide an overall assurance of the general accuracy and propriety of Govern- ment's financial and accounting transactions and not to disclose each and every accounting error or financial irregularity. With the considerable volume and variety of Government revenue and expenditure, my examination of the accounts is of necessity conducted by means of selective test checks and in-depth reviews designed to indicate possible areas of weakness, reliance for detailed checks on the regularity of the accounts being placed largely on the systems of internal control operated by individual departments.

3. Nevertheless if I am to give an adequate certificate of correctness on the statements rendered to me, it is essential that I carry out some measure of examination of the accounts of every department. Unfortunately in the year under review this became impracticable and I was required to advise the Deputy Financial Secretary and the heads of the departments affected, that I would have to suspend completely the audit examination of five major departments, with a combined annual revenue of $900 million and annual expenditure of $300 million, as well as the control of stores valued at over $80 million. To the extent therefore that the annexed statements, and others submitted under Section 11(c) of the Audit Ordinance, reflect the accounts of those departments, I am unable to express an opinion on their correctness.

4. Staff. The necessity to curtail the audit examination in this manner arose from the lack of sufficient staff to meet all the demands placed on me, a situation which derived in part from the general restriction placed in recent years on the growth of the Civil Service. In 1975-76 only a very limited and inadequate increase in my establishment was allowed and, piling Ossa on Pelion, in the current financial year the funds initially allocated to me were not enough even to fill all the approved posts on my already curtailed establishment, let alone to provide for any additions. Following my representations on the subject, the undesirability of so emasculating the Audit Department was appreciated by the Finance Branch of the Government Secretariat and with the improvement in the financial situation I am confident that appropriate staff increases will soon be approved. It will however be necessary to get new staff into post before a full audit can be recommenced and I anticipate therefore that some restriction of my examination will still be necessary in respect of the accounts for 1976–77.

5. The difficulties of carrying out a full audit programme have been exacerbated by the continued increase in the number and size of the accounts of funds and public bodies, many disposing of substantial resources, for the audit of which (supplemental to those of the Hong Kong Government covered in this report) I am statu- torily responsible. Moreover, as I commented in paragraph 61 of my previous report, much work has arisen from the extension of my enquiries into the use made by subvented organizations of the considerable Government funds placed at their disposal, which during the year totalled $1,300 million, over one-fifth of Government expenditure as a whole. My latest observations arising from the review of certain of those organizations are contained in paragraphs 57 to 77 of this report, but with the large number of such bodies receiving aid, it will inevitably take several years to carry out even an initial survey of all the accounts involved.

6.

STATEMENT OF ASSETS AND LIABILITIES

Deposits and Advances. The amount of $28,391,144.53 shown in the Statement of Assets and Liabilities under Deposits, Public Works Department, Contract Retentions, includes $1,005,683.13 in respect of re-entered contracts which is likely to be transferred to General Revenue in due course and further sums which are due for release but have not yet been claimed. The amount of $140,269,157.66 shown under Other Deposits, Miscel- laneous, includes $546,053.38 which would have been transferred to General Revenue had the department con- cerned carried out an appropriate review before the closing of the accounts. As in previous years many water deposits remained unclaimed, although depositors had been advised that refunds were due to them.

1