South China Morning Post
September 13, 2006

No central government ministries or organizations are immune from malpractices, China’s National Audit Office annual report reveals.

Rampant financial malpractices, ranging from budgetary abuses to spending state funds on staff housing, expensive villas and bankrupt, shut-down coal mines, have been revealed in the annual audit of 42 government institutions by China’s National Audit Office. The annual report was published by the National Audit Office early this month but only released through state media yesterday. No central government ministries or organisations were immune from financial misconduct, according to the 2005 annual report published on the audit office website. The National Development and Reform Commission, the keeper of the country’s macroeconomic control regime, seems beset by problems that bring its competence into question, with delays or failures in deploying 23.5 billion yuan of national treasury bond investments, more than a fifth of its work schedule last year, topping the list.

Other funding misappropriations by the commission uncovered in the report include handing out construction funds worth 27.41 million yuan to 10 already bankrupt and defunct coal mines, starting bogus businesses and paying for staff welfare from official funds. Various budget management irregularities were also uncovered involving more than a billion yuan. The commission admitted to most of its mistakes and claimed it had taken steps to fix the problems. The Ministry of Civil Affairs was found to have failed to report 749 million yuan in revenue last year and made about 18 million yuan in off-budget accounts from selling state land. Poor management of its lottery business led to losses on 55 million yuan in official funds. The ministry said it had set up a taskforce to recover the misspent money.

The Ministry of Finance was held responsible for aiding big state-owned enterprises through unauthorised funding. With its permission, a national assets management company was able to collect illegal commission fees totalling 154 million yuan in its handling of bad loans. Under the pretext of scientific research, the Commission of Science, Technology and Industry for National Defence spent 24 million yuan on staff housing. According to a report by the Legal Daily, the commission has recovered 13.2 million yuan. Despite having housing funds set aside in its budget, the Ministry of Commerce misappropriated an extra 7 million yuan in public funds to refurbish its bachelor staff’s apartments. Mishandling of state land assets was also identified, with the ministry selling more than 22,000 square metres of office building for 120 million yuan, which was kept in off-budget accounts.

Funds misconduct was also identified at the Three Gorges Project Office, which applied for 10 million yuan in construction funds in the name of the dam project and lent it to a holiday resort in outer Beijing. The Miyun Cloud Lake Holiday Resort promised to pay annual dividends of 500,000 yuan to the office. As in previous years, the audit report received wide coverage in the official media, with many dailies clamouring for more transparency in government and a tougher follow up to the audit by the Communist Party’s disciplinary bodies, together with the judiciary and the police. Although the state audit report has now been made public for four consecutive years, there are still no detailed laws requiring the judiciary and police to investigate auditing irregularities. “If previous years’ audit reports brought with them a `storm’, why is corruption still the No1 problem in China?” the Legal Daily asked in an editorial. ” Over the past few years, several hundred people have been punished, but the details of the punishment are still not known by the public.” Tracking down the responsible officials would seem a reasonable course of action. The so-called “Audit Storm” two years ago punished about 700 wayward officials for their mistakes and 21 billion yuan was recovered, it said.