Audit Report for FY2018: Outline of Selected Audit Findings
The Audit Report for FY2018 covers a wide variety of cases in different categories. The
following is an outline of the audit findings on matters of great interest to the public,
which features the characteristics of the report.

Contentsa.

Ensuring safety of people's lives
1) Provision of guidance and advice to owners of buildings that have undergone
evaluation of seismic capacity under the program to form a safe stock of
housing and buildings ..................................................................................................... 1b.

Social security
2) Setting of prices for medical examinations related to the secondary healthexamination benefit ....................................................................................................... 2c.

Effectiveness of programs and projects
3) Procurement of defense equipment via Foreign Military Sales (FMS) ......................... 4d.

Proper and fair operation of programs and projects
4) Imposition of consumption tax in the event that sole proprietors have closed
their business .................................................................................................................. 5e.

Stocks including assets and funds5) Scale of government contribution to the type 2 credit guarantee fund heldby the Organization for Small & Medium Enterprises and Regional
Innovation, Japan ............................................................................................................ 6f.

Proper execution of the budget and adequacy of the financial management
6) Financial management related to the implementation of the Basic Survey on
Wage Structure ................................................................................................................ 7g.

Environment and energy
7) Fabrication of fuel elements used in the JMTR testing and research reactor ................ 8h.

Information technology (IT)8) Implementation status of projects undertaken with subsidies for informationand communication technology utilization and application projects ............................. 8

1) Provision of guidance and advice to owners of buildings that haveundergone evaluation of seismic capacity under the program to forma safe stock of housing and buildings<Category>Presentation of opinions and/or demand for measures (Ministry of Land,
Infrastructure, Transport and Tourism)<Objectives of audit>
Audit conducted mainly with the objective of effectiveness
The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) provides Grants
for Comprehensive Infrastructure Development and Disaster Prevention /Safety(hereinafter referred to as “the grants”) to local governments which provide subsidies
to private business operators that implement seismic diagnoses, seismic retrofitting andreconstructions under the Projects for forming Safe Housing and Buildings Stock inorder to improve seismic safety of houses and buildings.
The Act on Promotion of Seismic Retrofitting of Buildings (Act No. 123 of 1995,
hereinafter referred to as “APSRB”) states that competent administrative agencies(hereinafter referred to as “the agencies”) may provide guidance and advice to theowners of existing buildings which are seismically ineligible in order to ensure
appropriate implementation of seismic diagnoses and seismic retrofitting. In addition,in the Basic Policy for Promoting Seismic Diagnoses and Seismic Retrofitting of
Buildings, MLIT states that the agencies should make efforts to provide guidance andadvice based on the APSRB to the owners of existing buildings which are seismicallyineligible. However, with regard to the existing seismically ineligible buildings—
including buildings listed in safety assurance plans, large-scale buildings which require
urgent safety assurance and specified existing seismically ineligible buildings(hereinafter referred to as “buildings which require seismic diagnoses”)—which are
not assured the quality of seismic safety after seismic diagnoses were conductedutilizing grants, the Board found that some agencies had not provided any guidance oradvice to owners, even though they were aware that no seismic retrofitting had been
implemented, or some agencies did not know the implementation status of the seismic
retrofitting.
Therefore, MLIT should take the following measures:
A. To instruct the agencies to regularly grasp the implementation status of seismic
retrofitting on existing seismically ineligible buildings, including buildings which
require seismic diagnoses, and their seismic safety do not meet standards properly
after seismic diagnoses have undergone; and to instruct the agencies to proactively
provide guidance and advice to the owners if seismic retrofitting of their buildings
has not been implemented.
B. To check regularly whether the agencies are providing guidance and advice, and ifthey do not provide guidance and advice, after hearing the reason, and to provide
them with technical advices.
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Improper amount: 816.55 million yen
Background amount: 1,176.76 million yen
The amount of grants provided to the owners of the buildings,
those of which the agencies do not grasp the status of seismic
retrofitting implementation after seismic diagnoses.

2) Setting of prices for medical examinations related to the secondary
health examination benefit<Category>Presentation of opinions and/or demand for measures (Ministry of Health,Labour and Welfare)<Objectives of audit>
Audit conducted mainly with the objective of regularity
In order to promote the prevention of the occurrence of cerebrovascular disease andheart diseases resulting from an employment-related causes, in accordance with theIndustrial Accident Compensation Insurance Act (Act No. 50 of 1947), the Ministry of
Health, Labour and Welfare (MHLW) provides secondary (follow-up) healthexamination benefits to workers who have undergone blood pressure tests, blood tests
or other tests, which are specified by an Ordinance of MHLW, and were diagnosed as
showing abnormalities in the findings for all items in those tests in their latest medical
examination conducted by their employers under the Industrial Safety and Health Act(Act No. 57 of 1972). MHLW pays the expenses required for secondary medical
examinations and specific health guidance (hereinafter referred to as “examination
expenses” for such expenses and “secondary examinations” for such examinations andguidance) to medical institutions or Rosai hospitals (Industrial Accident Compensation
Hospitals) which conducted follow-up examinations.
The Regulations of Industrial Accident Compensation Insurance Secondary Medical
Examination Benefits (hereinafter referred to as “benefit regulations”) stipulates thatexamination expenses are paid by the amount pursuant to unit prices for medical
examination (hereinafter referred to as “examination unit prices”) prescribed in thebenefit regulations depending on the combinations of test items in the secondary
examinations and whether or not specific health guidance was conducted. The
examination unit prices are composed of expenses for tests and specific healthguidance.
However, the Board of Audit found following issues:- In determining examination unit prices, MHLW calculated the amount higher than the
one properly calculated based on the points prescribed in the Appended Table 1:“Medical Fee Points” (hereinafter referred to as “Health Insurance Point Table”) of2

the “Calculation Method for the Amount of Expenses required to Medical Treatment
Pursuant to the provisions of the Health Insurance Act” (“Calculating Method for
Medical Fees” as called after 2008).
- MHLW has not ever conducted review of the amount of the expenses for tests basedon the revised “Calculation Standards for Industrial Accident Treatment-Related
Medical Expenses” (hereinafter referred to as “Calculation Standards”) and the
Health Insurance Point Table.
- MHLW calculated the amount of the expenses for tests including those that were notconducted.
-MHLW calculated the expenses for guidance without specific base for calculation, as
specific standards for implementation of specific health guidance were notprescribed.
Therefore, with regard to examination unit prices, MHLW should revise the benefit
regulations and take the following measures:
A. To calculate expenses for tests based on the points prescribed in the Health Insurance

Point Table.
B. To review the amount of the expenses for tests based on the revised Calculation

Standards and the Health Insurance Point Table.
C. To avoid calculating the amount of the expenses for tests that were not conducted.
D. To develop standards for implementation which stipulates specific contents, period,

guideline of time required for specific health guidance and to review expenses forthe specific health guidance based on the said standards.
Improper amount: 36.58 million yen
Background amount: 291.44 million yen
The payment amount equivalent to the expenses for specifichealth guidance which were calculated without specific basefor calculation.

33) Procurement of defense equipment via Foreign Military Sales (FMS)<Category>Special report on audit requested by the Diet
<Objective of audit>
Audit conducted mainly with the objective of effectiveness
The Board conducted an audit on the state of procurement of defense equipment via
Foreign Military Sales (hereinafter referred to as “FMS”) in response to a request fromthe House of Councillors.
The Board found the following issues:- With respect to the publicized information including the selection of two defense
equipment, no specific contents of analysis of alternative procurement measures havebeen published.
- No procedures for completion of the transactions involving reimbursement of initialinvestment costs based on the Cooperative Logistics Supply Support Agreement(hereinafter referred to as “FMSO I Case”) have been established.
- The FMS Contract Administration Services Surcharge, which is additional fee tocover expenses such as quality assurance and tests, has not been exempted or reduced.
- The deliveries of some defense equipment have not yet been completed, although thescheduled shipping date have passed.
- The unsettled amount for delivered defense equipment has grown large for somereasons such as reimbursement has not been completed.
- Some of procured defense equipment have not been recorded in the goods
management books.
- Requests for refunds of the amount that can be returned to Japan from the FMS TrustFund (hereinafter referred to as “Trust Fund”) have not been made.
- Receiving final Billing Statements takes long time even after the introduction of the
new account settlement system, which aims to settle the accounts within two years
after deliveries.
Therefore, it is important that the Ministry of Defense, by asking the U.S. government
for their cooperation when necessary, should pay attention to the followings, andimplement more proper FMS based procurement:- To properly fulfill its accountability for defense equipment selection procedures- To review procedures related to completion of FMSO_I cases4

- To consider any possible means to reduce the contract amount by way of a reductionand exemption of the FMS Contract Administration Services Surcharge- To continue to coordinate with the U.S. government to expedite the shipment of items
which have not yet been delivered though the scheduled shipping date had passed.
- To endeavor to reduce the unsettled amount, which has grown large, by asking the
U.S. side to send the Billing Statement promptly.
- To record the procured defense equipment in the goods management books promptly
and keep the records appropriately- To check the balance of the Trust Fund and request immediately refunds to the U.S.
government as necessary- To continue to urge the U.S. government to complete the reimbursements steadily byusing the new account settlement system
The Board of Audit will continue to audit from various perspectives whether FMSbased procurement of defense equipment is implemented appropriately.

4) Imposition of consumption tax in the event that sole proprietors haveclosed their business<Category>Measures taken (Ministry of Finance)<Objectives of audit>
Audit conducted mainly with the objective of effectivenessAt the consumption tax return hearings, since no methods for confirming assets otherthan inventories were set, the National Tax Agency did not appropriately check deemedtransfers of assets other than inventories owned by sole proprietors who discontinued
their business operations by effectively utilizing their business discontinuance notices
and financial statements.
Background amount: 1,185.42 million yen
The total amount of undepreciated balance of assets otherthan inventories owned by sole proprietors, which were nothighly likely to be appropriately taxed on deemed transfer ofassets.

55) Scale of government contribution to the type 2 credit guarantee fundheld by the Organization for Small & Medium Enterprises andRegional Innovation, Japan<Category>Presentation of opinions and/or demand for measures(Ministry of Economy, Trade and Industry,
Organization for Small & Medium Enterprises and Regional Innovation, Japan)<Objectives of audit>
Audit conducted mainly with the objective of effectiveness
The Independent Administrative Agency the Organization for Small & Medium
Enterprises and Regional Innovation, Japan (hereinafter referred to as “theOrganization”) was established in July 2004, and took over the loan guarantee service
by the dissolved Industrial Infrastructure Development Fund, and the Organization
receives government contribution as its resource for its loan guarantee service
implemented by using the Type 2 Credit Fund (hereinafter referred to as “Type 2
Fund”). The Ministry of Economy, Trade and Industry (METI) calculates the amountof government contribution required for the Organization to fulfill its loan guarantee
service using the Type 2 Fund when a new loan guarantee system is established; asof the end of 2017, METI calculated the necessary amount of government contribution
as slightly over 37,548.74 million yen, and the Organization retains this amount.
However, the Board found that utilization of the loan guarantee service has been
extremely low, and capital contribution by the government in the Type 2 Fund has
not been used effectively. Therefore, METI and the Organization should take thefollowing measures:
A. At METI, to review the amount of government contribution actually needed bytaking into account previous year’s useof the loan guarantee service, theratio of provision for loss on guarantees, and stability of the service; and at theOrganization, to pay back immediately the amount that can be recognized as
excessing the required amount of government contribution held at theOrganization to the national treasury, in accordance with the Act on General Rules
for Incorporated Administrative Agencies.
B. At METI and the Organization, to review the necessary amount of government
contribution in a timely and appropriate manner by fully sharing information on
use of the loan guarantee service and the ratio of provision for loss on guarantees
in order to prevent recurrence of a similar situation; and to build a system topromptly pay back to the National Treasury the assets related to capital
contribution by the government that are recognized as excessing the required
amount and as unnecessary assets.
(Improper amount: 20,261.03 million yen)66) Financial management related to the implementation of the Basic
Survey on Wage Structure<Category>Presentation of opinions and/or demand for measures (Ministry of Health,Labour and Welfare)<Objectives of audit>
Audit conducted mainly with the objective of regularity
The Ministry of Health, Labour and Welfare (MHLW) implements the Basic Survey
on Wage Structure (hereinafter referred to as “wage census”), one of the Fundamental
Statistical Surveys based on the Statistics Act (Act No. 53 of 2007). According to thesurvey plan approved by the Minister for Internal Affairs and Communications, thewage census is implemented by MHLW headquarters and Prefectural Labour Bureaus(hereinafter referred to as “Labour Bureaus”), and the Census must be conducted by
the method that the officials of Labour Bureaus and the enumerators visit businessoffices to be surveyed, distribute questionnaires and collect the completed ones. As
for the budgets at the Labour Bureaus to be spent for expenses related to conduct thewage census, MHLW instructs 47 Labour Bureaus to use the budget in the following
items: -“Allowance for Enumerators”, and “MHLW Survey Expenditures” of“Prefectural Labour Bureaus’ Shared Expenditures” of “Prefectural Labour Bureaus”
under “General Accounts.” However, at some Labour Bureaus, the Board of Audit
found that the wage censuses are often conducted via postal mail instead ofenumerators’ visits and the cost of wage census was expensed not from expenditure
items under “General Accounts” as instructed by MHLW headquarters but was
expensed as followings:- Expensed from expenditure items under “Labour Insurance Special Account,”which is separately managed from General Accounts.
- Expensed from expenditure items of General Accounts which were allocated to
implement projects other than wage census.
- Expensed from another items of “Allowance for Enumerators” of “Prefectural
Labour Bureaus’ Shared Expenditures” instead of “MHLW Survey Expenditures”of the same items as instructed.
Therefore, MHLW headquarters should take the following measures:
A. At both MHLW headquarters and the Labour Bureaus, to make sure relevant

officials fully comply with accounting laws and regulations through trainings sothat they can execute the instructions for budget and financial management
relating to statistical surveys properly in accordance with accounting laws andregulations.
B. To check the status of budget executions related to the statistical surveys

implemented by the Labour Bureaus, and to examine whether or not there are7deviations from budget estimations; if a deviation is found, to analyze its cause,
consider measures based on the analysis to ensure appropriate implementation of
the statistical surveys, and to build a system to appropriately estimate necessary
budgets to implement surveys.
(Improper amount: 37.10 million yen)

7) Fabrication of fuel elements used in the JMTR testing and research
reactor<Category>Measures taken (Japan Atomic Energy Agency)<Objectives of audit>
Audit conducted mainly with the objective of economy
In manufacturing fuel elements used in nuclear reactors for testing and research at
Japan Materials Testing Reactor (JMTR), due to lack of recognition of the necessityof issuing an order to manufacture fuel elements, taking into account the status ofcompliance with new regulatory standards, operation plans and stock quantities offuel elements, the fuel element manufacture was not suspended even after September
2012 though it was recognized that there was no prospect of restarting operation,
resulting in generation of unused fuel elements which require treatment or disposal.
(Improper amount: 1,096.75 million yen)8) Implementation status of projects undertaken with subsidies for
information and communication technology utilization andapplication projects<Category>Presentation of opinions and/or demand for measures (Cabinet (Cabinet Secretariat),
Ministry of Internal Affairs and Communications)<Objectives of audit>
Audit conducted mainly with the objective of effectiveness
The National Strategy office of Information and Communication Technology, which
was established inside the Cabinet Secretariat, is responsible for the overallmanagement of utilization of IT. Based on the “Government Information System
Development and Management Standardization Guidelines” (hereinafter referred to as“Guidelines”) developed by the liaison group of Chief Information Officers (CIO) of
Ministries and Agencies was enforced in April 2015. Based on the Guidelines, the IT8governance system was established within each ministry and agency, as well as thegovernment-wide, to manage individual projects related to the development andmanagement of the government IT system as a whole and appropriately. Also, basedon the “Implementation of Emergency Measures” issued in July 2015 (instructed by thechair of the Cybersecurity Promotion Board (an liaison committee of CISO)), theMinistry of Internal Affairs and Communications (MIC) developed an off-line
environment with high IT security standards called the “Secure Zone” for thegovernment’s IT systems operating on the Government Shared Platform (hereinafterreferred to as “Platform”), and started its operation in April 2017. However, the Board
of Audit found the followings:-MIC did not grasp the demand, review the scale of use and cost-effectiveness, andsufficiently coordinate with ministries and agencies before developing the Secure
Zone, and thus, the Secure Zone was not used for its original purpose until it was
abolished in March 2019, and the project effect was not observed.
-The Cabinet Secretariat did not sufficiently perform the necessary surveys andadjustments for budgets and as a result of it, IT governance was not working
sufficiently.
Therefore, the Cabinet Secretariat and MIC should take the following measures:
A. At MIC, to establish procedures for understanding of demand, a review of the scaleof use and cost-effectiveness, and coordination with ministries and agencies in atimely and appropriate manner before developing the Platform or adding functions
to it.
B. At the Cabinet Office, in order to strengthen government-wide IT governance,

especially when implementing projects, such as developing the government
information system with supplementary budget to cope with urgent matters such as
developing information security measures, to set out in the standard guideline theprocedures for checking implementation status and project management in a unified
manner and to fully notify each ministry and agency.
(Improper amount: 1,887.09 million yen)

9(Notes)
Improper amounts: Improper amounts represent any deficiency in the collection of taxes or social
insurance premiums to be collected; overpayments for construction orpurchases; overpayment of subsidies; amount of credit managed improperly;
amount of asset not utilized effectively; and any amount of assets statedimproperly in the statements of account and financial statements.
Background amounts: Background amounts represent overall amounts of payments or investments
etc. regarding matters concerned. Background amounts are presented when
improper amounts cannot be calculated for audit cases such as: 1) where theBoard finds, as a result of audit, any matters that it finds necessary to be
improved with regard to laws and regulations, system or administration; and2) which the Board reports to draw public attention to project cases of nonrealization of investment effect due to problems in project progress caused bypolicy issues.

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