Construction Engineering Environmental Capital Law Review (No. 12), "Project Final Accounts Audit" Analysis "Project Final Accounts Audit" Analysis.

Basic Interpretation of 1.

Project final accounts audit, referred to as project audit in practice, refers to how the state audit institutions use financial funds or state-owned funds in government-invested and government-invested projects (hereinafter referred to as government-invested projects), audit and supervise the implementation of the total budget or estimate of the construction project, the implementation of the annual budget and the annual final accounts, the settlement of individual projects and the completion of the project, investigate the authenticity and legality of construction project funds obtained by directly related design, construction, and supply units to promote the construction of a clean government and ensure the healthy development of the national economy and society. Article 2 of the Audit Law stipulates: "The State shall implement an audit supervision system. The State Council and the local people's governments at or above the county level shall establish auditing organs. The fiscal revenues and expenditures of various departments of the State Council, local people's governments at various levels and their departments, the financial revenues and expenditures of State-owned financial institutions, enterprises and institutions, and other fiscal revenues and expenditures and financial revenues and expenditures that shall be subject to audit in accordance with the provisions of this Law shall be subject to audit supervision in accordance with the provisions of this Law. The auditing organ shall, in accordance with the law, audit and supervise the truthfulness, legality and effectiveness of the fiscal or financial revenues and expenditures listed in the preceding paragraph." Article 2 of the regulations on the implementation of the Audit Law stipulates: "the audit referred to in the Audit Law refers to the act of auditing organs independently inspecting the accounting vouchers, accounting books, financial accounting reports and other materials and assets related to financial revenue and expenditure and financial revenue and expenditure of the audited units in accordance with the law, and supervising the truthfulness, legality and efficiency of financial revenue and expenditure." According to the above regulations, strictly speaking, non-governmental investment projects are not the object of the Audit Law.

There are essential differences between the audit of the final accounts of the project and the audit price of the project settlement:(1) the legal attributes are different. Audit is an administrative supervision act carried out by the state administrative audit organ, while the price is a civil legal act. (2) The scope is different. The audit of capital construction projects is the examination and supervision of the financial investment scale of the construction unit, the use of funds, the interception of state funds, the arbitrary expansion of investment scale, the implementation of financial discipline and other acts by the state audit organ. The price review is the review of the amount of work completed and its price within the scope of the contract. (3) The legal effect is different. The audit results of the final accounts of capital construction projects are binding on the construction unit and are an important measure for the administrative supervision of the construction unit by the audit administrative department. Once the results of the price review of the project cost settlement are confirmed by both parties to be legally binding on the contracting parties and become the basis for the settlement of the project. (4) Based on different. Audit is to examine and supervise the investment process and fund use of state-owned funds, the scale of investment, financial revenue and expenditure, the final accounts of project completion and the benefits of investment according to the relevant provisions of the state and local governments. It is to audit the implementation of the total budget or budget of the construction project, the implementation of the annual budget and the annual final accounts, the settlement of individual projects and the final accounts of project completion. The price review is based on the settlement standards agreed in the contract to the construction drawings, engineering change data, etc. to carry out all the verification, calculation, and finally through consultation to determine the cost of the project. The audit project cost is only one content of the audit, and the project cost is not negotiable. (5) The subject is different. The main body of the audit is the state administrative audit organ. The settlement price can be audited by the contractor itself or by a third party with the qualification of cost consulting. (6) The object is different. The scope of the audit object is relatively narrow. According to Article 22 of China's Audit Law and the Regulations on the Implementation of the Audit Law, China only uses all financial funds such as budgetary investment funds, special construction funds, funds raised by government borrowing debts, or does not use all financial funds, but the proportion of financial funds in the total project investment exceeds 50%, or the proportion in the total project investment is less than 50%, however, the government has the project construction, operation of the actual control of the construction project for the final audit. The object of the price review is the project agreed upon by the contractor and the contractor and their contract, and the price can be reviewed as long as the two parties agree, and the source of funds is not limited.

2. Government Investment Project Audit and Project Completion Settlement

Article 22 of the Audit Law stipulates: "Audit institutions shall audit and supervise the budget implementation and final accounts of government investment and construction projects dominated by government investment." Article 20 of the "Regulations for the Implementation of the Audit Law" stipulates: "The auditing agency shall conduct audit supervision in accordance with the law on the implementation of the total budget or budget estimates of government investment and construction projects dominated by government investment, the implementation of the annual budget and annual final accounts, the settlement of individual projects, and the final accounts of project completion; when auditing the construction projects specified in the preceding paragraph, it is possible to investigate the authenticity and legality of the construction project funds obtained by the directly related design, construction, and supply units." Article 6 of the notice of the National Audit Office on issuing audit regulations on government investment projects stipulates: "the key audit contents of government investment projects by audit institutions include the relevant contents of construction project contracts, including project cost, project quality, material procurement, investment performance, and the use of funds. Among them, the project settlement payment, that is, the contract price determined by the construction unit and the contractor, is a key content of the audit of the audit institution." The above-mentioned laws and administrative regulations clearly stipulate that government-invested construction projects need to be audited and supervised in accordance with the law, and the auditing authority can directly investigate the authenticity and legality of the construction project funds, but it does not stipulate that the audit conclusion of the auditing authority shall be used as the basis for the completion and settlement of the construction project.

Article 14 of the "Shanghai Audit Regulations" stipulates: "Government investment and construction projects mainly invested by the government shall be audited by the auditing agency in accordance with the provisions of the state and this city. The construction unit or the construction agent unit shall include the bidding documents and construction The contract signed by the unit clearly uses the audit results as the basis for the completion and settlement of the project." The above-mentioned local legislation requires that the contract expressly stipulates that the government investment project shall be based on the audit conclusion as the basis for the settlement of the project price.

However, the Law Working Committee of the Standing Committee of the National People's Congress on the audit results as the basis for the completion and settlement of government-invested construction projects in local regulations (Law Working Committee letter [2017] No. 2) (hereinafter referred to as the "research opinion") believes that: "Local regulations force the audit results as the basis for the completion and settlement of both parties to the contract, and expand the audit decisions applicable to the audited entity to the contract counterpart, it restricts the legitimate contractual rights of construction enterprises, lacks the basis of superior law, and exceeds the local legislative power." Therefore, the fact that government-invested projects should be audited in accordance with the law does not mean that the audit conclusions of the auditing authority should be used as the basis for the completion and settlement of the project between the contracting parties, so such local legislative provisions actually confuse the boundaries between administrative functions and civil legal relations, limit civil rights and exceed the authority of local legislation. The improper provisions of local laws and regulations on "using audit results as the basis for the completion and settlement of government investment and construction projects" should be corrected by amending local laws and regulations in the light of the "Research Opinions" and the corresponding legislative procedures adopted by the local people's congresses.

3. of the rules for determining the conclusion of the audit of the final accounts of the project in the case of construction contract disputes.

According to the provisions of the Audit Law, if it is found through audit that the financial revenue and expenditure and financial revenue and expenditure of the construction unit violate the provisions of the state, and if the audit organ thinks that the person in charge and other persons directly responsible should be punished according to law, it shall be suggested that the financial revenue and expenditure of the construction unit violate the provisions of laws and administrative regulations and constitute a crime, Criminal responsibility shall be pursued according to law. Accordingly, the audit report is only the basis for the audit organ to make administrative penalties, and should not be used as the basis for the parties to determine the cost of the project. The Supreme People's Court "on Changzhou Securities Co., Ltd. and Changzhou Xinggang Curtain Wall Decoration Co., Ltd. project payment dispute reply" ((2001) Min Yi He Zi No. 19): "The bidding activities in this case and the contract signed by both parties are legal and valid, and the contract has been fulfilled, should be protected in accordance with the law. The securities company's claim that the audit conclusion made by the audit department should not be supported."

In judicial practice, most courts hold that in the absence of a special agreement, the contractor or contractor's claim to use the audit conclusion as the basis for settlement should not be supported. The Supreme Court's Reply on Government Audit (2001) states: "Audit is a kind of administrative supervision by the State over the construction unit and does not affect the validity of the contract between the construction unit and the construction unit. The case of a construction project contract shall be based on the agreement of the parties as the basis for the court's decision. The audit conclusion can only be used as the basis for judgment if the contract expressly agrees to use the audit conclusion as the basis for settlement or if the contract agreement is unclear and the contract agreement is invalid." Article 13 of the "Opinions" of the Jiangsu Higher People's Court stipulates: "For construction projects invested by the state finance, if the parties do not agree in the contract to use the review and audit results of the state finance department or the state audit department as the basis for the settlement of the project price, the contractor requires If the project price is settled in accordance with the contract, the people's court shall support it." Article 22 of the Guide of the Hebei High Court stipulates: "Under the circumstances that the parties have confirmed the settlement price of the project through the settlement agreement and have basically completed the performance, the audit conclusion or financial evaluation opinion made by the state audit organ shall not affect the validity of the settlement agreement between the two parties." Heilongjiang High Court (2015) Heimin Zhongzi No. 37 believes that the determination of whether the project involved in the case has been audited by a statutory audit institution will not affect the validity of the settlement of the project funds by both parties.

Where the contract expressly provides for the conclusion of the administrative audit as the basis for settlement, the audit conclusion may be used as the basis for judgment. However, the parties in the construction contract only agreed to "audit conclusion" as the basis for settlement, can not of course the two sides agreed to "audit" as an administrative audit. Chongqing High Court (2017) Yu Min Shen No. 1709 believes that the "audit" agreed in the construction contract is not clearly the audit of the state audit institutions. According to the provisions of the Audit Law, the audit of the construction unit by the state audit organ is an act of administrative supervision, and the legal relationship between the auditor and the auditee as a result of the state audit is different in nature from the civil legal relationship between the parties to the case. Therefore, in a civil contract, the parties should be specific and clear about the agreement to accept the administrative audit as the basis for determining the civil legal relationship, and not by interpreting the presumption that at the time of the signing of the contract, the parties have agreed to accept the intervention of the audit behavior of the state organ in the civil legal relationship. In addition, although the contract clearly stipulates that the conclusion of the administrative audit shall be used as the basis for settlement, if there is a long-term pending trial, different local courts have different provisions in practice. Article 3 of the "Answer" of Shandong High Court on November 4, 2020 stipulates that for government investment and construction projects dominated by government investment, if the contract stipulates that administrative audit and financial evaluation are used as the basis for settlement of project funds, they shall be handled in accordance with the agreement. However, the employer deliberately delayed the submission of the audit or hindered the achievement of the audit conditions, and the administrative audit and financial evaluation departments clearly stated that they could not conduct the audit or exceeded the audit period agreed in the contract for three months without justifiable reasons, if the audit conclusion or evaluation opinion has not been made, the party concerned shall apply for judicial appraisal of the cost of the project, which shall be granted. Article 17 of the Opinions of the Sichuan Higher People's Court stipulates that the parties clearly agree in the contract that the project price shall be based on the audit results of the government audit department, and the audit time shall be agreed. The audit conclusion is not made within the audit time agreed in the contract, or although the audit time is not agreed, the contractor has not sent it to the government audit department for audit within a reasonable period of time after being urged by the contractor, if the contractor claims to settle the project price according to the settlement price confirmed by the signatures of both parties, it may support it. Article 11 of the "Answers" of the Guangdong Higher People's Court stipulates that if the parties agree to use the audit and audit results of the finance, audit and other departments as the basis for the settlement of project funds, they shall be handled in accordance with the agreement. If the finance, auditing and other departments make it clear that they are unable to conduct an audit or audit or have not issued an audit or audit conclusion for a long time without justifiable reasons, the people's court may determine the project price by means of judicial appraisal after the application of the parties concerned and the conditions for judicial appraisal are met.

(Note: The original text is contained in the Law of Construction Contracts in China, Law Press, October 2019. The present text has been partially revised)