The Shenzhen municipal government boldly exposed vast misuse of State assets last year after it sent auditors to investigate large-scale government-funded projects. And the scope of mismanagement it uncovered has sent shockwaves through the city, but has won public support for tighter and more systematic control of the projects' operation.

It started as part of a routine annual audit, which took place between July and November of last year. In late December, the municipal government sent an audit report to the municipal people's congress, detailing the performance of four massive projects: Seaside Rural Tourism Park, the city's waste water treatment plants, Shenzhen Economic Cooperation and Development Fund and the Shenzhen Welfare Lottery Public Fund.

Massive waste

The seaside project went wrong even before it was started. The idea came from a city government official who, around 1997, was on a visit to Shajing Town of Bao'an District in a Shenzhen suburb when he suggested: "This place should be reserved for tourism projects."

But Shajing is hardly an ideal location for sightseeing, according to Chen Tangyi, director of the Planning and Budget Commission of the Shenzhen People's Congress. There are power plants and an airport in its neighborhood, with poor air and water quality and considerable noise. Worse, the swampy soil that is definitely not fit for building roads or facilities.

But still, roads were built, and at exorbitant prices. By the end of June last year, the 1.61-square-kilometer park had cost 938 million yuan (US$113 million), of which 667 million was directly invested by the government, and has suffered a net loss of 35 million yuan (US$4.2 million) - excluding depreciation and loan interest - since it started operation in September 2001. However, as Chen says, the project was first mentioned in 1998 in a city budget as "just a couple of million yuan." But one year later, hundreds of millions had already been poured into it, mostly on the road leading to the area.

If there had been serious and impartial research, and if there had been checks and balances, the project might have been vetoed before it was launched.

As a matter of fact, the auditors found that it had no pre-construction study, nor any construction plan or its own budget. It took only 13 months to break ground, while the normal time for researching a project of this magnitude would have taken two to three years, according to the audit report.

"If we had stopped it earlier, there might have been less losses," Chen said.

From 1982 to 2003, the city government invested 1.3 billion yuan (US$156.6 million) in four sewage plants designed to treat 1.12 million tons of waste water daily. However, the operators of the plants used the investment funds for redundant buildings, such as 228 apartment suites for its 108 staff members.

The other two projects involve public funds that are either for poverty relief for neighboring cities or welfare for Shenzhen citizens. But it was found that 77.19 million yuan (US$9.33 million) of the first fund had been diverted to constructing new buildings and part of the welfare fund has also found its way to places it was not supposed to go.

Public outcry

The revelation has sparked widespread criticism from the public.

"Even though I expect a certain degree of mishandling and corruption in these government-funded projects, I still find it hard to get over my distress. How could they waste so much of our hard-earned money and feel easy about it?" asked David Yang, an employee of a shipping firm, who pays around 400 yuan(US$50), or 8 percent of his 5,000 yuan(US$600) monthly salary, in taxes.

"I'm in the private sector," says Huang Shaoliang, executive of a local petrochemical firm. "If I lost 100 million of my company's money, I would kill myself."

"Some people are squandering government funds, they spend it like there's no tomorrow," Huang Liman, Party secretary and chairman of the Shenzhen People's Congress, said bluntly in her speech at a representative seesion on the day the report was received.

Then acting Mayor Li Hongzhong pledged that every government-invested project or fund should be well-managed. Those agencies in charge should remember that this is taxpayers' money.

The story about the four projects became front-page news in Shenzhen. The Shenzhen Daily carried an editorial which read: Some of our government agencies seem to have the idea that they can squander all the money at their disposal, regardless of financial returns.

While expressing their indignation over the scale of wasterful spending, the public and media have also shown their appreciation for the government's courage in publicizing the scandals. This kind of auditing amounts to the city government's scrutinizing itself, says an article on Southern Metropolis News.

Dong Guoqiang, deputy director of the planning and budget commission of the Shenzhen People's Congress, attended the preliminary evaluation of the audit report. He says he did not expect at that time that the city government would lay bare its mistakes to the public.

"The unprecedented amount of media exposure has shown the determination of the city government in tackling this problem," a media insider was quoted as commenting.

Remedy and system-building

Huang Liman said on the same occasion that further investigation was being conducted into the four projects, and whoever is responsible would be dealt with accordingly.

The four projects were started many years ago, approved by predecessors of the current leadership. It will be a sensitive subject about who will be made accountable, said Southern Weekend.

Gao Xingwen of the Shenzhen Supervision and Inspection Bureau admits that his department is currently involved in the investigation, but he cannot clarify what the next step will be, adding that there is no timetable for it.

A year ago, the 2002 annual audit uncovered large amounts of waste at 12 city-owned hospitals, where roughly 600 million yuan worth of medical equipment was sitting idle. An internal shakeup has taken place inside the hospital system.

In 2003, the audit bureau examined 783 projects, revealing various cases of misconduct which have resulted in a total loss of 280 million yuan, and reduced all investment by 1.2 billion yuan. This year, auditing on the efficiency of government department will be expanded to at least six major projects, which will take up to 30 percent of the agency's business, said Chen Zhigang, director of the audit bureau.

In the past 20 years, the Shenzhen Audit Bureau has inspected a total of 9,663 organizations, uncovering roughly 42.7 billion yuan worth of misdirected funds, and transferred 20 cases to judicial departments for criminal prosecution.

Mayor Li cited an example: Once, a government agency submitted a budget of 75 million yuan, of which 56 million turned out to be unnecessary.

"All of the city's finance and State coffers should be transparent enough so that the citizens have a clear idea of what is going on," he emphasized.

To make that happen, the city will soon promulgate a new regulation to allow the audit bureau to start supervision over large-scale government-funded projects from their very beginning, rather than conducting postmortem, Dong Guoqiang, deputy director of the project budget committee of the city Congress, told China Daily.

"Large-scale project" means those with over 100 million yuan in investment, according to sources with the audit bureau.

"The new regulation will empower audit authorities to trace the whole project and take necessary actions against violators in a timely manner," Dong said. "It will be easier to fight corruption, cut down costs and make government investment more efficient."

"We are going to connect the computer system of the Finance Bureau with that of the city People's Congress, so that supervisors can know every budget expenditure just like they know their own hands," Mayor Li said.

Shenzhen's bold move has been applauded by scholars, but they suggest that, in the long run, an independent audit department must be installed to ensure fairness and impartiality.

"Since the government is in charge of the audit bureau, its independence will inevitably be eroded," said Yang Xiaojun, an expert in administrative law.

"The audit bureau should not be affiliated with any local administrative body, but must be accountable to a higher-level audit agency," argued Yang Lixun, a researcher at Shenzhen Academy of Social Sciences.

On another front, China pledged last year to make all auditing and investigation reports public by 2007, except for those involving State secrets, business secrets and other content unsuitable for publishing.

"Publishing the audit report was the best we could do," said an official with the audit bureau.

But if this incident could at least help make it a norm to publish all audit results, decision-making at the whims of leaders will happen less frequently, he said.

(China Daily March 1, 2004)