Chinese state auditors in 2003 discovered serious financial malpractice in use of disaster relief funds, said Li Jinhua, auditor-general of the National Audit Office (NAO) of China.

Li made the remarks Wednesday when delivering a report on use of the central budget in 2003 to the Standing Committee of the National People's Congress.

Investigations show that nine of the 14 flood-hit counties in the Huaihe River Valley, which were in central China's Henan Province and east China's Anhui and Jiangsu provinces, grafted 136 million yuan (US$16.4 million) from the disaster relief fund, accounting for 19 percent of the compensation fund for house reconstruction in the area.

Huoqiu County in Anhui Province embezzled 3.6 million yuan (US$0.4 million) which should have been distributed to 1,804 households for house construction.

In Funan County of Anhui, 17 cadres from three towns pocketed 200,000 yuan (US$24,180) earmarked by the central government for the resettlement of people in the flood discharge area.

The same problem was also found in southwest China's Yunnan Province in earthquake relief, said Li.

Investigations show that by the end of March this year, the central finance department had earmarked 120 million yuan (US$14.5 million) to earthquake-hit areas in Yunnan. But up to now, 51.74 million yuan (US$6.2 million) was still kept in the county finance. Some departments even used the relief fund to balance the local budget or build restaurants.

(Xinhua News Agency June 24, 2004)