China's chief auditor Liu Jiayi said Wednesday that funds embezzled from public finances totaling more than 26.77 billion yuan (3.9 billion U.S. dollars), revealed in last year's audits, had been recovered or returned to former funding channels.

Liu Jiayi, head of China's National Audit Office (NAO), made the statement in a report submitted to the ninth session of the Standing Committee of the 11th National People's Congress (NPC), China's top legislature.

He said audits of 55 central departments last year had exposed illegal allocations of funds totaling 4.05 billion yuan, or 3.5 percent of total funds audited, and loss and waste of funds totaling 467 million yuan, or 0.4 percent.

Thirty people involved in 116 cases handled by discipline inspection and judicial organizations had been arrested, indicted and sentenced according to the law, he said.

Another 117 people were punished according to administrative and Communist Party disciplines.

"Most of the cases concern embezzlement or transfer of state assets to attain illegal profits," Liu said, adding dereliction of duty, illegal decision-making, collusion to embezzle state assets, cheating loans or manipulating stocks using insiders' information or expertise, were among means to attain the profit.

He said all departments and units had carefully overhauled problems found in last year's audits.

EXTRAVAGANCE

Audits of central departments last year show that management of some departments' conference and official trip expenses "is not strict enough" and some units have problems of extravagance, waste, false reporting of expenses and cheating.

"Some officials increase the number of personnel, change the route or prolong a stopover duration of official trips abroad without permission," said the report.

Liu said the NAO had conducted investigations on the use of funds for conferences and official trips in 24 central departments, which showed that relevant expenditures had greatly dropped thanks to the strict implementation of the frugality principle and enhanced management of overseas trips.

The report said the 24 departments' conferences expenses were 217 million yuan last year, down 17.8 percent; overseas trips cost 191 million yuan, down 17.9 percent.

INCOMPLETE TAXATION SYSTEM

It said the country's consumption tax system was incomplete as some enterprises tried to lower factory prices by means of affiliated transaction so as to spend less on consumption taxes.

"Investigations over 44 enterprises show that they have spent 11.6 billion yuan less in consumption tax in 2007 and 2008, or 27 percent of the total amount of consumption tax the enterprises should turn in," Liu told lawmakers. Taxation authorities are currently working to improve the taxation system.

ILLEGAL LENDING

Auditors also found illegal lending by some banks.

Liu said some grassroots branches of the Industrial and Commercial Bank of China, China Construction bank, CITIC Group, Bank of China, Bank of Communications and China Merchants Bank had illegally lent 21.5 billion yuan of land reserve loans, fake mortgage loans and loans provided to substandard real estate companies.

"Some branches of the six banks had issued loans up to 10.69 billion yuan to projects not in line with industry policies or unapproved projects," he said.

He added that due to lax supervision, the use of 4.36 billion yuan of credit funds changed to other purposes.

About 27.3 billion yuan of illegal loans have been recovered and efforts were being made to retrieve the rest. Almost 500 people were punished, the report said.

The chief auditor also proposed to draft the budget law as soon as possible to promote transparent financial management.

(Xinhua News Agency June 24, 2009)