No. 18 of 2015 (General Serial No. 215):
The Audit Results of the Financial Revenues and Expenditures of China Grain Reserves Management Corporation for the Year 2013
(June 28, 2015)
In accordance with the stipulations of The Audit Law of the People’s Republic of China, in 2014 the National Audit Office conducted auditing on the situation of financial revenues and expenditures of the year 2013 of China Grain Reserves Management Corporation (hereinafter referred to as China Grain Reserves Corporation.) The auditing work was focused on the headquarters of China Grain Reserves Corporation and twelve subunits including Grain Oil co., Ltd. (hereinafter referred to as the Oil Company), the State Grain Reserve Chengdu Grain Storage Research Institute (hereinafter referred to as Chengdu Grain Research Institute), and made follow-on and retroactive efforts on relevant items.
I. Overview
China Grain Reserves Management was founded in May 2000, has RMB16.68 billion of registered capital by the end of 2013 and possesses 24 branches, 7 secondary wholly-owned or holding subsidiaries. The main business areas it engages in include the business and management of state grain reserves (including edible oils), and it takes the overall responsibility for the quantity, the quality, as well as the storage safety of state grain reserves.
As reflected in the consolidated financial statement of China Grain Reserves Corporation, the total assets by the end of 2013 amounted to RMB518.393 billion, the total liabilities reached RMB470.383 billion, and there was RMB48.01 billion worth of owners’ equity. The realized operating revenue of the same year was RMB190.827 billion, and a net profit of RMB2.897 billion was earned. The asset-liability ratio was 90.74%, the return on equity was 6.03%, and the rate of the value maintenance and value increase of state-owned capital was 109.59%.
Dahua Accounting Firm (special general partner) audited the consolidated financial statement of 2013 of the corporation and issued a standard and unqualified auditing report.
The audit results conducted by the National Audit Office indicated that China Grain Reserves Corporation has positively promoted the application of scientific grain storage technologies, completed rotation of the state grain reserves and other national grain macro-control tasks, gradually standardized the company's internal management, and carried out the enterprise and market operation. The audit also found that China Grain Reserves Corporation still has some irregularities in aspects of operating performances, development potential etc.
II. Major Problems Found in the Audit
(I) On management performance
1. On financial revenue and expenditure
(1) From 2007 to 2013, the headquarters of China Grain Reserves Corporation and its five subunits including the Oil company, Jiangxi branch, Chengdu Grain Research Institute had bought on credits for longtime in financial revenue and had an understatement of subsidy income, and failed to reserve in time for bad debts for the long-term uncollectible accounts receivable, which resulted in an overstatement of RMB581 million revenues, and an understatement of RMB369 million, and an overstatement of RMB609 million cost expenses and an understatement of RMB270 million, which led to an understatement of RMB991 million profits in the duration of seven years among which the overstated profit of 2013 amounted to RMB81 million.
(2) By the end of 2013, the subordinate Handan Depot had failed to include part of the purchased fixed assets into the accounting in account, which led to an understatement of RMB4,034,400 of assets, an understatement of RMB2,516,300 of liabilities, and an understatement of RMB1,518,100 of owners’ equity.
(3) By the end of 2013, the headquarters of China Grain Reserves Corporation had not straightened the property relations of its 381 already purchased and actually managed overall takeover libraries or incorporated them into the consolidated financial statements. Instead, it separately established accounts management, resulted in unlisted assets of RMB107.505 billion, liabilities of RMB1036.05 billion, and owner's equity of RMB3.9 billion. By the end of May 2014, the headquarters of China Grain Reserves Corporation had included 13 libraries in the consolidated financial statements, laid off 92 non-compliant libraries. The remaining 276 ones entailed RMB89.757 assets, RMB86.373 billion liabilities, and RMB3.384 billion owner’s equity.
2. On the enforcement and implementation of macroeconomic policies of the state, decisions and arrangements
(1) In 2009 and 2010, three subordinate Depots in Zhuozhou irregularly operated 218,700 tons of policy-related grain and made a profit of RMB17,982,600.
(2) By the end of 2013, four units including the subordinate Jilin Branch had some of the policy-related grain stored in some non-qualified enterprises or canopies which did not meet the requirements; the subordinate Qingdao Depot put the purchased 5,000 tons of the policy-oriented grain in storage without clearing the food, resulting in problems such as excessive grain impurities.
In 2013, the subordinate Hengyan Depot misappropriated RMB84,939,300 of central grain rotation loans for the purchase of land and commodity grain.
3. On internal management
(1) From 2012 to 2013, due to the inappropriate control and management of the subordinate Henan branch, Luohe Depot and other units, problems such as shortage of grain and inconsistency between the quality and the price had appeared to grain stored in those libraries responsible for the storage, resulting in the loss of RMB785 million and the potential loss of RMB189 million, in which the loss of 2013 amounted to RMB495 million.
(2) From 2010 to 2013, the subordinate five units and four grain enterprises including Zhuozhou Depot and Jixian Depot had had poor supervision in cooperation with grain purchase and sale. The grain storage in those enterprises was stolen and sold or mortgaged, resulting in RMB126 million of grain-purchasing funds facing the risk of loss, of which the loss in 2013 was RMB4.8063 million.
(3) From 2012 to 2013, the subordinate Chengdu Grain Purchase and Sale and Distribution Co., Ltd. had been derelict of its regulatory duty, causing cooperative grain and oil buying and selling enterprises to seek illegitimate interests of RMB2.7962 million in the preparation of interim national oil reserves, of which the illegitimate interests amounted to RMB1.3219 million in 2013.
(4) By May 2014, three units including the subordinate Datong Depot, Jiexiu Depot had made misjudgment or performed poorly in management. Two enterprises engaged in cooperation with them in grain purchase and marketing business owed a total of RMB128 million grain purchase funds and faced with the risk of loss.
(5) By May 2014, the subordinate Heilongjiang Grain Reserves Zhaodong Depot had lost RMB48.9078 million in buying and selling commodity corn due to mismanagement.
(6) In 2013, the subordinate Heilongjiang Grain Rice Industry Co., Ltd. put commodity grain in simple grain barns, leading to food quality problems and a loss of RMB7.0391 million.
(7) In 2010, 50 acres of land of the subordinate Qinhuangdao Depot were withdrawn by the local government because of not being used and developed for a long time, resulting in RMB4.5 million of land-purchase funds facing the risk of loss.
(8) From 2011 to 2014, the subordinate Heilongjiang Grain Purchase and Sale and Distribution Co., Ltd. had paid three years’ rent of RMB5.3987 million at one time, resulting in long idleness of the warehouse.
(9) From 2010 to 2013, tree units including the subordinate Henan Branch had invested in the construction of some warehouses and logistics terminals etc., which has been in idle since then, involving RMB314 million of assets.
(10) From 2010 to 2013, some subordinate units, without complete licenses of the land use right certificate and other certificates, had started to establish 217 projects, involving RMB9.062 billion of funds, among which 17 projects started in 2013 involved RMB715 million funds.
(11) From 2009 to 2011, three units including the subordinate Dalian Depot and China Grain Reserves Rice Industry co., ltd. (Shanghai) had failed to bid according to stipulations in the construction of the projects, involving RMB56.6013 million.
(12) By the end of 2013, due to the lax controls in some invested projects such as the expansion of warehouse volume etc., the project costs of three units including the subordinate Hengyang Depot had exceeded RMB59.1992 million of the estimate budgets.
(II) On development potential
1. From 2008 to 2013, the headquarters of China Grain Reserves Corporation had set up 40 rice and flour processing enterprises by direct investment and by authorizing its subordinate units to invest, but the operating situation is generally poor. By the end of 2013, only 19 of those enterprises were still producing and operating, 3 of which already could not make their assets meet liabilities. The other 21 enterprises has been discontinued, leased or in idle.
2. From 2008 to 2013, six security responsibility accidents had occurred in enterprises responsible for the storage such as the subordinate Lindian Depot, and caused a direct economic loss of RMB3.113 million
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, and will notify the general public of the details of straightening and rectification of China Grain Reserves Corporation.
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.