MOF Supervision & Evaluation Bureau Officials Answer Press Questions on the Interim Measures for Third-Party Budget Performance Evaluation Supervision

     In order to further guide and regulate third‑party institutions to participate in budget performance evaluation, and effectively improve the quality and standard of performance evaluation practice, the Ministry of Finance recently issued the "Interim Measures for the Supervision and Administration of Budget Performance Evaluation Services by Third‑party Institutions" (hereinafter referred to as the "Measures"), effective from August 1, 2021. Recently, the relevant official of the Supervision and Evaluation Bureau of the Ministry of Finance answered reporters' questions on the "Measures".

　1. Q: What is the background and significance of the formulation and issuance of the "Measures"?

A: As independent professional institutions, third‑party institutions have been widely involved in multiple aspects and fields of budget performance management, mainly in performance evaluation, and have become an important force in promoting the comprehensive implementation of budget performance management. They play a positive role in strengthening budget management, enhancing the independence and credibility of performance evaluation, strengthening social supervision, and expanding public participation. However, it should also be noted that since this work has only recently started, there are still problems such as lack of unified norms for the selection and use of third‑party institutions by the entrusting parties and for the necessary management and supervision, unclear relevant work requirements and industry standards, uneven quality of performance evaluation work by third‑party institutions, and a market that is not sufficiently regulated, with some third‑party institutions operating in disorder. To a certain extent, these problems have affected the improvement of the quality of performance evaluation and performance management, and urgently need to be guided and regulated.

The Party Central Committee, the National People's Congress, and the State Council attach great importance to the participation of third‑party institutions in budget performance management, and the public and third‑party institutions are also closely following this issue. In September 2018, the "Opinions on Comprehensively Implementing Budget Performance Management" issued by the Central Committee of the Communist Party of China and the State Council explicitly required: "Guide and regulate third‑party institutions to participate in budget performance management, and strictly supervise the quality of their practice." In June 2020, the Financial and Economic Affairs Committee of the National People's Congress, when deliberating the draft final accounts of the central government for 2019, clearly proposed "regulating the performance evaluation by third‑party institutions". In order to implement the decisions and arrangements of the Party Central Committee and the State Council, in January 2021, the Ministry of Finance issued the "Guiding Opinions of the Ministry of Finance on Entrusting Third‑party Institutions to Participate in Budget Performance Management" (Cai Yu [2021] No. 6), which, while guiding and regulating the relevant business activities of third‑party institutions participating in budget performance management from the perspective of the entrusting party, also proposed to strengthen the guidance and supervision of third‑party institutions and promote the improvement of practice quality.

In recent years, the Ministry of Finance has focused on strengthening the supervision of the practice behavior and quality of performance evaluation by third‑party institutions, and has made it one of the important contents of financial and accounting supervision. This is mainly achieved through spot checks and re‑evaluation of performance evaluation results, extending supervision to the quality of work of relevant third‑party institutions. For those with problems, through means such as interviews and criticism, and issue alerts, it urges them to make serious rectifications, effectively promoting the continuous improvement of the quality of performance evaluation practice by third‑party institutions. At the same time, judging from the research conducted by financial departments, many third‑party institutions strongly appeal to financial departments to strengthen the supervision of the quality of performance evaluation practice by third‑party institutions, and effectively rectify and standardize market order. Therefore, it is objectively necessary to, on the basis of summarizing and refining practical experience in recent years, formulate and issue the "Measures", which, from the perspective of the entrusted party, guide and regulate the performance evaluation services of third‑party institutions. This is conducive to implementing the requirements of the Party Central Committee and the State Council on strengthening financial and accounting supervision and comprehensively implementing performance management, and is conducive to promoting the healthy development of third‑party institutions engaged in performance evaluation, continuously improving the scientific nature, fairness, and credibility of performance evaluation.

　2. Q: Could you briefly introduce the process of researching and formulating the "Measures"?

A: The Ministry of Finance attaches great importance to the research and formulation of the "Measures" and has included it in the Ministry's 2020 normative document formulation plan. Since early 2020, the following work has mainly been carried out:

First, preliminary research. At the beginning of 2020, through special research, seminars, expert consultations, etc., we fully listened to the opinions of some local financial departments (bureaus), representatives of third‑party institutions, universities and colleges, and others, and comprehensively and deeply studied the necessity of carrying out supervision of performance evaluation services by third‑party institutions under the current situation.

Second, the formation of the initial draft and the draft for comments. On the basis of the preliminary in‑depth research, in the first half of 2020, the initial draft of the "Measures" was drafted. In the second half of 2020, we widely solicited opinions from various central departments, local financial departments, and local supervision bureaus of the Ministry of Finance. On the basis of fully absorbing the opinions of all parties, and in combination with the "Guiding Opinions of the Ministry of Finance on Entrusting Third‑party Institutions to Participate in Budget Performance Management", the initial draft was revised and improved to form the draft for comments.

Third, public solicitation of comments. From February 8 to March 10, 2021, the draft for comments of the "Measures" was made available to the public for comments through the Ministry of Finance's portal website. During this period, we organized discussions with some representatives of the National People's Congress and the Chinese People's Political Consultative Conference, representatives of third‑party institutions, and experts and scholars, and once again solicited opinions and suggestions on the "Measures" from the participants.

Fourth, further improvement and issuance of the "Measures". From March 2021 to the present, based on the feedback and suggestions from the public and all parties, the draft for comments of the "Measures" was once again revised and improved, fully absorbing and adopting relevant suggestions. After strictly going through the relevant review and approval procedures within the Ministry, the "Measures" were officially released.

　3. Q: What are the main contents and scope of application of the "Measures"?

A: The "Measures" contain 32 articles. Articles 1 to 5 clarify the purpose and basis for drafting, basic definitions, and regulatory authority. Articles 6 to 12 clarify the professional principles, codes of conduct, and information entry of third‑party institutions and personnel engaged in performance evaluation. Articles 13 to 21 clarify the basic procedures and work requirements of third‑party institutions for performance evaluation. Articles 22 to 29 clarify administrative remedies, supervision and inspection, irregularity management, and regulatory responsibilities. Articles 30 to 32 clarify foreign investment security review, effective date, etc.

The "Measures" mainly apply to the management and supervision by financial departments, in accordance with laws and regulations, of third‑party institutions and their staff engaged in budget performance evaluation services, and to the professional service activities in which third‑party institutions accept the entrustment of the entrusting party, evaluate the budget performance evaluation objects, and issue budget performance evaluation reports. Third‑party institutions mainly include professional consulting institutions, accounting firms, asset appraisal institutions, law firms, scientific research institutes, universities and colleges, etc.

　4. Q: What effective measures does the "Measures" put forward to guide and regulate third‑party institutions to improve the quality of budget performance evaluation practice?

A: First, clarify the rights and responsibilities of all relevant parties. This includes: third‑party institutions independently complete the entrusted matters with the convenience and relevant materials provided by the entrusting party and the evaluated object, and are responsible for the authenticity and accuracy of the budget performance evaluation reports they issue; the entrusting party and the evaluated object are responsible for the authenticity and accuracy of the materials they provide; and financial departments, in accordance with laws and regulations, manage and supervise third‑party institutions and their staff engaged in budget performance evaluation services.

Second, establish a "lead evaluator" system for performance evaluation. Third‑party institutions are required to set up a "lead evaluator" system, to consolidate the responsibility of the "lead evaluator", and to have a "lead evaluator" with outstanding professional abilities and good professional ethics to check and control the performance evaluation business, thereby promoting the quality of performance evaluation work of third‑party institutions.

Third, standardize the working procedures of third‑party institutions for budget performance evaluation. Articles 13 to 21 of the "Measures" clearly stipulate the performance evaluation processes and related work requirements, including signing of entrustment contracts, establishing working groups, conducting on‑site investigations, issuing performance evaluation reports, uploading report information, archiving documents, and protecting information security.

Fourth, promote the effective integration of multiple supervision methods. On the one hand, strengthen credit supervision. Third‑party institutions are required to enter basic information, bad credit records, and major illegal records in budget performance evaluation within the past three years into the "Credit Management Platform for Third‑party Institutions in Budget Performance Evaluation" (hereinafter referred to as the "Credit Management Platform"). Performance evaluation entrusting parties and the public can query the credit information of third‑party institutions through the Credit Management Platform. On the other hand, implement "double random, one public" supervision. Targeted inspections are carried out for third‑party institutions with suspected violations of laws and regulations; for routine supervision matters, non‑targeted inspections are conducted through random selection of inspection objects and random assignment of inspection personnel, and the relevant inspection results are made public to society through the platform.

　5. Q: What considerations does the "Measures" take in implementing the reform requirements of "streamlining administration, delegating power, improving regulation, and optimizing services"?

A: In order to thoroughly implement the relevant requirements of the Party Central Committee and the State Council on the reform of "streamlining administration, delegating power, improving regulation, and optimizing services", and to avoid reducing the legitimate rights and interests of market entities or increasing their obligations, the "Measures" do not set access thresholds for the performance evaluation service market, nor do they impose unreasonable restrictions on market entities. At the same time, adhering to a quality‑oriented and merit‑based selection approach, the "Measures" put forward requirements for entrusting parties to select third‑party institutions on a merit basis and for third‑party institutions to select "lead evaluators" on a merit basis, and optimize supervision methods by improving "credit supervision" and "double random, one public" supervision, thereby implementing more effective in‑process and post‑event supervision. This arrangement not only avoids setting access thresholds for performance evaluation through administrative approval or filing, but also encourages professional institutions such as accounting firms and asset appraisal institutions to actively enter the performance evaluation market, cultivate and strengthen the professional forces in performance evaluation, and rapidly enhance the capabilities and level of third‑party institutions in performance evaluation.

In addition, as an important supporting measure of the "Measures", the Ministry of Finance, relying on the "Unified Reporting System of the Ministry of Finance", has developed a credit management platform, which not only facilitates the public to query the credit status of third‑party institutions engaged in budget performance evaluation, but also provides information support for performance evaluation clients to select third‑party institutions on a merit basis, fully reflecting the concept of equal emphasis on supervision and service.

　6. Q: What is the relationship between the "Measures" and the "Guiding Opinions of the Ministry of Finance on Entrusting Third‑party Institutions to Participate in Budget Performance Management" issued by the Ministry of Finance in January this year?

A: For the "Measures", the "Guiding Opinions of the Ministry of Finance on Entrusting Third‑party Institutions to Participate in Budget Performance Management" (hereinafter referred to as the "Opinions") has the significance of a "higher‑level law", and it is an important basis for the drafting of the "Measures". At the same time, the "Measures" focus more on regulating and guiding third‑party institutions, closely focusing on the field of performance evaluation services of third‑party institutions, and are the concretization and operationalization of the relevant requirements of the "Opinions" in the field of performance evaluation services of third‑party institutions. For example, in terms of selecting high‑quality third‑party institutions, the "Opinions" clearly state: "Select third‑party institutions with outstanding professional capabilities, standardized institutional management, and good professional reputation." The "Measures" refine the three specific conditions for selecting high‑quality third‑party institutions and clarify that "the entrusting party may, according to the special needs of the entrusted budget performance evaluation work, add specific conditions for the selection of third‑party institutions, but shall not use unreasonable conditions to treat third‑party institutions differently or discriminatorily." For example, in terms of strengthening the supervision of the practice quality of third‑party institutions, the "Opinions" put forward principled requirements. The "Measures" further refine the relevant operational measures through "credit supervision" and "double random, one public" supervision.

　7. Q: How will the financial departments organize and ensure the implementation of the "Measures"?

A: The "Measures" will take effect on August 1, 2021. To ensure the full implementation of the "Measures" and achieve the expected results, the financial departments will focus on the following work:

First, do a good job in policy publicity and interpretation after the issuance of the "Measures". Invite relevant experts and scholars, comrades from central departments and local financial departments, and representatives of third‑party institutions to interpret the content of the "Measures" from their respective fields and different perspectives, expand the awareness of the policy throughout society, and ensure full understanding by all sectors of society.

Second, strengthen research and guidance and training for various localities. Organize relevant special research, and continuously track the new situations and new problems that arise in the implementation of the "Measures". Combine online and offline methods to actively carry out policy guidance and business training for all relevant parties, and encourage social forces to carry out relevant training in a lawful and compliant manner.

Third, do a good job in platform testing and launch. Accelerate the testing and trial operation of the "Credit Management Platform for Third‑party Institutions in Budget Performance Evaluation". Based on feedback from all relevant parties, further improve the platform functions to ensure its smooth online operation nationwide.

Fourth, continuously strengthen cultivation and regulation. Equal emphasis on service and supervision, further strengthen the cultivation, guidance, and service guarantee for third‑party institutions engaged in performance evaluation services, organize and carry out supervision and inspection of the practice quality of third‑party institutions in budget performance evaluation at appropriate times, and make the results of supervision and inspection public to society in an appropriate manner.