Case Study on Water Pollution Prevention Audit


Audit Project:

Haihe River Valley Water Pollution Prevention Audit


Auditee: Corresponding level of governments and their environmental protection and public finance arms; project implementation entities; related enterprises


Audit Objective:

to review whether the stage target of the “10th Five Year (2001-2005) Plan for Haihe River Valley Water Pollution Prevention”, approved by the Chinese government, was achieved by the end of 2003


Type of Audit: Performance Audit


Audit Implementation:

Paralleled audits and joint audits by the Agriculture, Resources and Environmental Protection Audit Department of the National Audit Office of China (CNAO), resident audit offices of CNAO and provincial audit offices


Audit Scope: the implementation of the general pollutant control measure for Haihe River Valley; the performance of central and local governments, as well as some enterprises, in controlling Haihe river water pollution from 2001 to 2003.



Background of the Haihe River Water Pollution Prevention Project

Haihe river flows through 6 Provinces and Municipalities (Beijing, Tianjin, Hebei, Henan, Shandong, Shanxi) in China. The Haihe Valley lies in the middle east of China, between the dry and humid climate zone, has the least rainfall among the east Chinese coastal areas, takes 3.3% of the total land area of China and fosters 10% of its population. The Haihe valley is now suffering water shortage, industrial structure misbalance and heavy pollution. Due to some technical and productive cost reason, some small-scaled and low-tech paper-making factories, tanneries and brewage firms are not able to meet the standards for waste discharge required by laws. In order to curb the pollution in Haihe Valley, the government approved the “10th Five Year (2001-2005) Plan for Haihe River Valley Water Pollution Prevention” (hereinafter referred to as the Plan). The Plan is to invest 40 billion RMB yuan (about USD 5 billion) into the above mentioned 6 provinces and municipalities to control the discharge of wastes into Haihe River and improve the water quality in Haihe Valley, through building of sewage treatment plants, promoting clean production, controlling industrial pollution source, carrying out comprehensive valley renovation, promoting eco-agriculture, drilling wells for drinking water and building environmental surveillance capacity.


Background of the Audit Project

Haihe river valley is one of the national key valleys for water pollution prevention in China. In order to promote the environmental protection in national key valleys, and to seek for an environmental auditing model suitable for Chinese environmental protection practices, the using of funds for Haihe river valley water pollution prevention is chosen as the audit project.

On the other hand, there are a lot of experiences on environmental auditing worldwide, because water environment audit was set the first research topic of the Working Group on Environmental Auditing (WGEA) of INTOSAI and, in recent years, a lot of SAIs carried out audits in this respect.



Central and local governments: responsible for the environmental situation of national and local level

Environmental protection administrations of corresponding level governments: the general management agency for water pollution prevention, in charge of preparing water pollution prevention plan, monitoring water quality and contamination sources, providing environmental statistics, implementing pollution control measures, collecting sewage discharge fees.

Public finance departments of corresponding level governments: in charge of collecting and appropriating public funds for environmental protection projects, supervising the use of these funds, managing sewage processing and discharge fees.

Project units: using project funds, implementing water pollution prevention projects, and project accounting

Enterprises: as stipulated by laws, enterprises is obliged to control and make their sewage discharge meet pre-set criteria.


Audit Procedure

Organizing Audit Project

This audit project is a combination of concurrent audits and joint audits. In pilot auditing stage, joint audit method is used, while in formal auditing stage, concurrent audit is adopted.

In pilot auditing stage, a joint audit team was formed by auditors from the Agriculture, Resources and Environmental Protection Audit Department of CNAO, some resident audit offices of CNAO and some provincial audit offices, to carry out audit in Tianjin Municipality.

In formal auditing stage, organized by the Agriculture, Resources and Environmental Protection Audit Department of CNAO, the resident audit offices of CNAO in Taiyuan, Changsha and Tianjin, and the provincial audit offices of Shandong, Shanxi and Henan provinces set up their respective audit teams and carried out audits in the provinces of Shanxi, Hebei, Shandong and Henan, and Beijing Municipality as well, at the same time.

In reporting stage, all audit teams submitted their audit reports to the Agriculture, Resources and Environmental Protection Audit Department of CNAO. Then the department consolidated these reports and finalized a comprehensive report on Haihe river valley water pollution prevention, which was submitted to the central government after authorized by the top management of CNAO.

Audit Cycle

This project had lasted for 12 months, from February 2004 to February 2005. As it was the first time for Chinese audit institutions to audit key valley water pollution prevention projects, the preparatory work, including conducting pilot audit and preparing audit implementation program, took 4 months, 1/3 of the whole audit cycle, longer than usual projects.

The audit cycle:

Pilot audit: from February to March 2004, joint audit team carried out audit in Tianjin.

Prepare audit implementation program: from April to May, 2004, prepared by the Agriculture, Resources and Environmental Protection Audit Department of CNAO according to the pilot audit results.

Formal audit: from June to October 2004, CNAO’s resident audit offices and provincial audit offices formed their respective audit team and audited the other 5 provinces and municipalities in Haihe river valley.

Audit teams submitted audit reports: November 2004

Consolidated audit reports: from December 2004 to February 2005, the Agriculture, Resources and Environmental Protection Audit Department of CNAO had consolidated the final audit report for the whole Haihe river valley.


Contents of Audit

The implementation of control measures for gross waste discharge volume:

Gross volume control measures: effectiveness of residential and industrial pollution control

Result of gross volume control: major contamination (Chemical Oxygen Demand/COD and Ammonia Nitrogen)

The performance of responsible entities, including central and local governments and enterprises

Central government: timeliness of examination and approval of water pollution prevention projects; appropriateness of transfer payment to local governments

Local governments: timeliness of fund raising; project progress; contamination control measures and their results; the truthfulness, legality and efficiency of the use of funds

Enterprises: pollutant discharge volume and level; appropriateness of capital input for pollution prevention


Criteria for audit


1. Laws and regulations: “Environmental Protection Law of the People’s Republic of China”; “Water Pollution Prevention Law of the People’s Republic of China”; “Accounting Law of the People’s Republic of China”, etc.


2. Environmental Standards: “General Sewage Discharge Standards” (GB8978-1996); “National Surface Water Environment Quality Standards” (GB3838-2002); “Pollutant Discharge Standards for City Sewage Processing Plant” (GB18918-2002); “Pollutant Discharge Standards for Synthetic Ammonia Industry” (GB13458-2001); “Quality Standards for Water Discharged into City Sewage” (CJ3082-1999); “Water Pollutant Discharge Standards for Paper Industry”(GWPB2-1999; and other related environmental standards.


3. Other criteria: “10th Five Year (2001-2005) Plan for Haihe River Valley Water Pollution Prevention”; “Function and Section of Surface Water Environment”; “Environmental Gazette”, “Project Environmental Impact Assessment Report” and project budget, etc.


Audit findings

Water Pollution Prevention Project achieved positive effect

Major water pollutants discharge volume in 2003 reduced compared with the year 2000. Some the projects were completed and put into operation, which brought environmental benefits to Haihe river valley.

Local governments actively adjusted their industrial structure, closed down some small chemical plants and small printing and dyeing firms, which produced heavy pollution and could not steadily meet the discharge standards. The governments also carried out Clean Production Program and Environmental Impact Assessment.

The system was set up in most provinces to collect sewage-processing fees from water users, which raised a large amount of funds for the construction and operation of sewage processing plants.

The use of sewage discharge fees becomes more reasonable. More funds are put into industrial pollution control.


 Problems to be addressed and solved

Operating and under construction water pollution prevention projects accounts less than 50% of the Plan. The pollution of some reaches of the river became worse, because most of the planned projects have not been completed and put into operation. In 2000, 65% of the 20 key reaches of Haihe river valley measure up the standards for water quality. However, this proportion reduced to 57% in 2003.

Some government departments do not examine and approve pollution prevention projects proposed by enterprises in time. The main reason is: related department believe that some of the pollution prevention projects in the Plan should be invested by enterprises themselves as the “polluters pay” principle. However, some local governments hold the opinion that local governments and enterprises do not have adequate funds to support that invest.

Some local governments do not have adequate capacity in environmental surveillance. Some local (county level) environmental surveillance unit can not provide environmental service because of lacking in technician and equipment. Consequently, the surveillance services have to be provided by upper level environmental surveillance units, which causes task jam and lower surveillance frequency. On the other hand, only a small number of enterprises were equipped with pollutant on-line monitors, and even fewer of them are operating normally. For example, there are 400 major polluting enterprises in one region, which are required to install pollutant on-line monitor by related laws. However, audit found out only 4 of them equipped with monitor and only 2 enterprises were operating monitors regularly. Therefore, environmental protection units are not able to hold comprehensive and scientific statistics for industrial pollution.

The environmental statistic working procedure is not properly designed. In China, the fundamental data for environmental statistics comes from the reports of enterprises, which will be consolidated into regional environmental statistic information by environmental statistical personnel or units. As sometimes enterprises do not provide actual data, it is necessary for environmental statistical personnel to modify those data submitted by enterprises. However, we found that not all modifications made are appropriate and sufficiently supported. In some cases, for various reasons, statistical personnel modified the data from enterprises although they were correctly provided. For example, one enterprise declared 2300 tons of industrial COD discharge in 2003, while the figure was amended to 60000 tons by statistical personnel. After due examination and measurement, auditors recognized that the enterprise provided the exact figure, and the modification made was not correct.

Some enterprises discharge high concentration pollutant, which makes the sewage contain more COD and ammonia nitrogen than the sewage plants can handle.


Auditors opinion

Audit appraisal:

The provincial and municipal governments in Haihe river valley have attached great importance to the control of water pollution. The local governments and enterprises in the valley have been following related laws and regulations on environmental protection, built up their consciousness of environmental protection, actively raised funds for a lot of water pollution prevention projects and taken some effective measures to curb water pollution. However, up to the year 2003, many water pollution prevention projects did not start constructing as planned, industrial pollution control process was laggard and the water quality of some reaches is comparatively low.


Audit recommendations:

Related departments should expedite the plan, examination and approval of industrial contamination sources control projects, and appropriate designated funds in time.

Local governments shall adopt various financing methods, start to implement the projects listed in the Plan, increase the input for environmental surveillance capacity building and improve the environmental statistical method in order to avoid any inappropriate adjustment of environmental statistics.

The above-mentioned audit recommendations have been accepted by auditees. In November 2004, the Ministry of Public Finance appropriated pollution prevention fund of 120 million RMB yuan (about 15 million USD) to related provinces and municipalities.