Political drama aside, the dismissal of Shanghai party boss Chen Liangyu for misusing 4 billion yuan in social security funds is the kind of story that should send shivers down accountants' spines. There are clear rules governing the city's social security fund: it can invest only in Treasury bonds, not speculative investments. Yet, with the blessings of a senior leader, the rules were totally ignored. Our sympathy should go to the fund's accountants, who may have taken part in the fraud unwillingly. We do not know if they will face prosecution or disciplinary action for failing to blow the whistle. Or whether they will get off by proving that they were merely following orders from high up, and had no alternative but to obey. Time and again, reports from the mainland have shown that government departments usually take a casual approach to accounting rules. A week before Mr Chen's downfall, a story in the Guangzhou-based 21st Century Business Herald reported that the National Audit Office had found that 129.4 billion yuan of public money had been misspent by 54,000 government units and state-owned enterprises during the first eight months of the year. The most shocking part of the report was that no central government ministries or organisations were found to be clean of financial malpractices - ranging from budgetary abuses to spending state funds on staff housing. In Hong Kong, our Audit Commission often exposes irregularities committed by various government departments. But most of them involve waste, overspending or underspending as a result of policy or administrative oversight, not fraud or misappropriation. Senior officials may get flak for spending a fortune on renovating their offices or residences. But stringent rules and internal controls ensure they cannot pocket any state funds, or direct money earmarked for specific programmes to unapproved purposes. Staff from the Treasury seconded to various departments keep a watchful eye on how every dollar is spent, to make sure it goes to its budgeted purpose. They owe their loyalty to the Treasury, and leave no room for heads of departments to misuse their funds. In 2002, then premier Zhu Rongji was in Hong Kong to officiate at the opening of the 16th World Congress of Accountants. To warm applause, he told of how he had inscribed four characters - 'Make no false accounts' - for the mainland's three main accountancy institutes, even though he was not a good calligrapher. 'Honesty and trustworthiness are not only the cornerstone of the market economy, but also the lifeblood of firms and individuals in the accounting profession,' he said. Mr Zhu acknowledged frankly that the mainland's accounting system and professional standards were still significantly behind international levels. Insiders said Mr Zhu made the crucial decision that mainland companies wanting to list in Hong Kong had to be audited by foreign accountancy firms, against strong opposition from various ministries. The former premier could not have been more right. The Chen case shows that, despite his exhortations, many government accountants are still not in a position to stand by their professional code of conduct. A lot has been said about the need for the mainland to have an independent graft-buster like our Independent Commission Against Corruption. That is certainly true. But the Communist Party will also need to allow the development of a strong, independent professional sector, and empower its members to say 'no' to bosses who demand that they bend the rules. C.K. Lau is the Post's executive editor, policy ck.lau@scmp.com
