How can an SAI ensure the responsibility of accounting officials who have caused loss to the national treasury and how to ensure early recovery of that loss is a delicate and sometimes difficult question for many of the ASOSAI member countries who essentially do not exercise judicial power.
Like many ASOSAI members, the Board of Audit, Japan does not belong to the Judicial Branch, and therefore, does not exercise judicial power against any of the State accounting officials. However, the Board of Audit, Japan through its adjudication system exercises what is called "quasi-judicial function" against such loss.
The Board of Audit is also entitled to demand that head of auditee agency take "disciplinary action" against an accounting official when it finds that the official has caused grave loss to the State either deliberately or by gross negligence.
The adjudication system functions as the effective means to secure early recovery of the State loss. In case of demand for disciplinary action, although the right has been rarely exercised by the Board of Audit, it has so far functioned as a strong "deterrent" for any misconduct of State accounting officials. The system also helps to enforce auditee agencies' submission of accounts to the Board of Audit. The outline of the systems and examples of recent adjudication by the Board of Audit are given below:
(1) Board adjudication based on the Board of Audit Law
Article 32 of the Board of Audit Law stipulates that:
If a cash official has lost cash, the Board of Audit examines whether he has caused a loss to the State due to lack of due professional care, and adjudicates whether he is liable for indemnifying the loss or not.
If a State commodity management official has lost or damaged a State commodity or commodities or otherwise caused loss to the State either by violating the State Commodity Management Law or by failing to manage a State Commodity or Commodities in compliance with the Law, the Board of Audit shall examine whether he has caused the loss intentionally or by gross negligence, and adjudicate whether he is liable for indemnifying the loss or not.
If the Board of Audit adjudicates that a cash official or a State Commodity Management official is liable for indemnifying the loss, the head or other supervising official of the department to which he belongs, should order him to indemnify the loss.
A cash official or State Commodity Management official is not exempted from indemnification unless the Diet (Parliament) decides so.
The Board of Audit may re-adjudicate in five years when it finds that its past adjudication was wrong due to misstatements on statement of account(s) or omission of vouchers and evidences. The preceding two paragraphs apply to this paragraph.
Article 27 prescribes that:
Head of department, supervising officer, or other responsible officer should notify the Board of Audit when they find the following regarding the accounts subject to the audit by the Board of Audit:
Based on this provision and the provisions of the Public Account Law article 42 and the Commodity Management Law article 32, the Board of Audit is constantly informed by auditee agencies of the loss of cash, security or other State assets whenever auditee agencies find them.
Therefore, the Board of Audit adjudicates the responsibility of cash officials and/or commodity management officials when the Board:
In adjudicating loss of cash, the Board examines whether:
If the case in question satisfies all of the three conditions above, the Board adjudicates that the cash official is liable for indemnification.
In adjudicating loss/damage caused by State commodity management official, the Board examines whether:
If the case in question satisfies all of the three conditions, the Board adjudicates that the commodity management official is liable for indemnification.
A cash official or commodity management official is not exempted from indemnification unless the Diet decides so.
Since the Board adjudication is not a judicial judgment, cash officials and State commodity officials reserve their right to appeal to court. When they win in the court, they are exempted from indemnification even if the Diet does not decide so.
(2) Board adjudication based on the Law for the Responsibility of Budget Execution Officials
Separate from adjudication based on the Board of Audit Law, the Board of Audit adjudicates responsibility of "budget execution officials" based on the Law for the Responsibility of Budget Execution Officials. "Budget execution officials" are those who are engaged in State budget execution such as Contract Officer, Contract Certificating Officer, Disbursement Officer, Contract Supervising Officer, Inspection Officer, etc. Cash officials and State commodity management officials^re not categorised as "budget execution officials". The Board adjudicates responsibility of a budget execution official when he caused loss to the State by violating article 3 of the Law for the Responsibility of Budget Execution Officials deliberately or by gross negligence. The Board examines whether:
If the case in question satisfies all of these four conditions, the Board adjudicate that the budget execution official is liable for indemnification.
(1) Board demand for disciplinary action based on the Board of Audit Law
The Board of Audit Law article 31 States that:
If the Board of Audit finds a grave loss, a State accounting official has caused to the State either deliberately or by gross negligence, it may demand that the head of supervising official of the agency to which the official belongs take disciplinary action against him.
This article also applies when a State accounting official does not submit statement of accounts and/or vouchers in violation of Accounts Verification Regulation or when he does not obey Board of Audit's demand stipulated in article 26 of this Law.
The "State accounting official" refers to State accounting official such as contracting officer, disbursement officer, revenue collecting officer, cash officer, etc. The Board of Audit exercises its own discretion in judging whether specific loss was "grave" and whether such loss was caused by "gross negligence" or "by deliberations". The "head of supervising official" refers to official who is legally entitled to take disciplinary action against the State accounting official. The Board is entitled to "demand" that "head of supervising official" take disciplinary action. Therefore, the Board is not entitled to take disciplinary action directly against the State accounting official. The Board is also entitled to demand disciplinary action when accounting official does not submit to the Board, statement of accounts and/or vouchers of evidences.
(2) Board demand for disciplinary action based on the Lawfor Responsibility of Budget Execution officials
The Law for Responsibility of Budget Execution officials article 6 stipulates: If the Board of Audit through its audit of adjudication finds:
that a budget execution official by negligence or deliberation has caused loss to the State in violation of Article 6 of this Law, or
that a budget execution official by gross negligence or deliberation violated article 3 of this Law without causing loss to the State,
the Board can demand the nominator of the budget execution official disciplinary action against the budget execution official.
This is Board's demand for disciplinary action based on its adjudication (based on the Law for the Responsibility of Budget Execution Official) or result of its audit [see 1(2) above].
In this case, unlike (1) above, both gross negligence and slight negligence satisfy the conditions for demand for disciplinary action. When the Board of Audit demands disciplinary action based on this article, this article supersedes article 31 of the Board of Audit Law.
Whether to take discplinary action is left to the discretion of auditee agencies. However, since the demanded disciplinary actions are published in the Board's annual Audit Report which is deliberated in the Diet, the auditee agencies are strongly stimulated to take such action.
(1) Adjucation
Case 1: An example of adjudication of cash official
(Outline of the case)
The Ministry of Post and Telecommunication (MPT) runs Postal Life Insurance (PLI). The PLI subscribers are entitled to borrow money (PLI loan) from post office according to the amount of the insurance he subscribes. Cash official X in A post office was handling cash assisted by assistant cash officer Y. For PLI loan services, officer Y was receiving cash from and paying cash to PLI subscribers on behalf of the official X.
Officer Y forged PLI Loan Application Forms by copying subscribers' addresses, names and PLI Certificate numbers from PLI subscriber ledger, showed forged Loan Application Forms to his assistant Z, and requested Z to pay him cash for PLI loans falsely claiming that the subscribers had delegated him to receive PLI loans. He also falsely claimed that he had checked PLI Certificates in subscribers' homes.
When Z passed loan documents to X for PLI loan payment approval, Y made the same claims to X. Believing these claims were true, XclearedZfor paying Ycash for PLI loan. Based on these clearances, Z paid Y total Yen 6,490,000 on over 24 occasions. After receiving from Z, Y pocketed total of this amount.
(The Board adjudication - summary)
Cash official X failed to exercise due professional care in clearing cash payment because he failed to obey PLI Regulation (1982 MPT Regulation) which says that PLI cash official should pay, or approve to pay PLI loan in cash only after:
Therefore, the Board adjudicates that the cash official X should indemnify the total amount of the lost cash as stated by Public Account Law article 41.
(Action taken by the post office executive)
Based on the Board adjudication, Post and Telecommunication Minister ordered X to indemnify the lost cash.
Case 2: An example of adjudication of commodity management official (Outline of the case)
Commodity Management Officer X in H Post Office received an un-invoiced official parcel (contained in a cardboard box) addressed to her Director Y.
Later, she received an invoice of a movie projector, and opened the box and confirmed the content as the same. Y instructed X to officiallly accept the projector (i.e. registerthe projector on Commodity Ledger and place it in commodity warehouse).
X placed the projector beside her desk and started other CMO businesses such as checking mailing-matter measuring equipment and mailing bags because these businesses were quite urgent.
She thought she would place the projector in the commodity warehouse after finishing these urgent businesses. However, X forgot to place the projector in the warehouse and left the Post Office leaving it by her desk. Deputy Director of her section Z later locked the section room and left the Post Office. X thereafter took annual leave for two days. On the last day of the two-day annual leave, she noticed that she forgot to place the projector in the commodity warehouse, and hurriedly made a phone call to the Post Office but received an answer that there was no movie projector there. X immediately went to the Post Office and searched for the projector but could not find it. X searched for the projector with staff of her section also on the next day, but could not find it, and ultimately lost the movie projector.
(The Board adjudication - summary)
Although Commodity Management Officer X was instructed by her Director Y to place the projector in the Post Office's commodity warehouse, she failed to do so and left the Post Office violating State Commodity Management Law article 17. However, on the same day she:
- checking mailing-matter measuring equipments;
- placed the movie projector in her office (4th floor of the Post Office) which was unlikely to be intruded by outsiders.
Judging from (1) and (2) above, the loss of the movie projector was not caused by grave negligence by X. Therefore, the Commoddity Management Officer X is not liable for indemnifying the loss caused by her losing the movie projector.
Since 1953, the Board has not demanded disciplinary action because auditee agencies voluntarily took disciplinary actions in all cases where the Board considered disciplinary action was required.