US embassy cable - 05HANOI145

UNCLAS  HANOI 000145 
 
SIPDIS 
 
 
UNCLASSIFIED 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB/IFD/OMA: L. GALLAGHER 
TREASURY FOR OASIA/MDM: J. FRANCO 
 
E.O. 12958: N/A 
TAGS: EFIN, EAID, VM 
SUBJECT:  RESPONSIBILITIES AND REFORMS OF STATE AUDIT 
VIETNAM 
 
REFTEL: 04 Hanoi 03273 
 
1. Summary:  ECON/C met with State Audit of Vietnam's 
Administrative Department Director Mr. Nguyen Hong Long on 
January 12.  The director described SAV's function and 
authority and confirmed post's recently reported (see 
reftel) findings on military budget transparency.  Long also 
shared the status of the new draft law on state audit and 
articulated steps that Vietnam is taking toward improving 
budget oversight and transparency for both the process of 
budgetary audits and the reporting results.  Long further 
expressed interest in building a relationship with the 
Embassy and learning more about the U.S. model and 
mechanisms for auditing public spending and preventing 
corruption.  End summary. 
 
2. On Wednesday, January 12, 2005, ECON/C and Econ Assistant 
met with Director of the Administrative Department Mr. 
Nguyen Hong Long, Manager of the Special Areas Audit 
Department Mr. Nguyen Van Minh, and other experts at State 
Audit Vietnam (SAV).  SAV is the financial inspection agency 
in Vietnam with the highest authority.  Its primary role is 
to audit all budget and financial statements that use state 
budget monies, including those of the Ministry of Defense 
and Ministry of Public Security.  The new Law on State 
Budget, effective January 2004, stipulates that proposed 
annual budgets can only be approved after the audit 
settlements of the previous year have been approved. 
 
Status of the draft law on state audit 
-------------------------------------- 
3. Regarding the draft law that was discussed in the 
November 2004 National Assembly session, Long reported that 
the National Assembly decided that SAV should be an agency 
that is responsible to the National Assembly and independent 
rather than reporting to the Government. Under the new 
revisions to the draft law, the National Assembly will 
redefine the responsibilities, reporting line and 
organizational structure of SAV.  The new draft will allow 
the National Assembly to appoint SAV's Chief Auditor and 
Deputy Chief Auditor, as well as give SAV and the National 
Assembly the authority to call ad hoc audits.  These special 
audits can be called based on off-schedule auditing needs, 
suspicions of violations or in case of an emergency 
situation. Currently only the Government can call ad hoc 
audits.  According to Long, the new law on state audit will 
be submitted to the National Assembly Standing Committee in 
February 2005.  SAV anticipates that the National Assembly 
will approve the law in the May 2005 session. 
 
SOE audits 
---------- 
4. SAV has an audit division that handles State Owned 
Enterprises (SOE), the State Bank of Vietnam (SBV) and State- 
owned financial institutions.  However, the SOE Law rather 
than the Law on State Audit governs SOE accounting and 
reporting.  According to Long, because of time and resource 
constraints, SOEs are not audited every year but nearly 
every 2-3 years.  There is no official schedule or timeline 
required for SOE reporting.  The SBV is audited annually but 
other state owned financial institutions are audited less 
frequently. 
 
Transparency 
---------------- 
5. According to the new State Budget Law, the results of the 
annual state audit are sent to the National Assembly for 
approval.  Results are then publicized, either by SAV 
through a press conference or other media.  SBV audit 
results are also sent to the National Assembly.  The process 
for state-owned financial institutions may differ, depending 
on whether or not the audit is part of the annual audit or 
an ad hoc audit.  Long reported that for audits of SOEs, the 
results are also publicized, including financial figures as 
required by the SOE Law and including SAV audit comments. 
 
6. On SAV's role in combating corruption, Long said SAV's 
function is solely to audit and certify compliance with laws 
for agencies using the state budget and public property. 
This role differs from that of the State Inspectorate, which 
may investigate activities beyond settlement of the state 
budget.  During the annual audit, if SAV identifies a 
possible violation, it requests the relevant agency to 
remedy the problem.  SAV primarily follows the annual 
auditing plan, but will report any suspicions about agency 
 
spending to the National Assembly. In the case of major 
problems or where the agency does not address the problem, 
SAV will request an investigation by law enforcement 
officials.  In the last 10 years, SAV has been responsible 
for having 10,000 billion Dong returned to state coffers, 
Long noted. 
 
7. Long concluded by stating that he hoped to work with the 
Embassy and the United States Government to improve SAV's 
capabilities. 
 
MARINE 
 
 
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