China plans audit of funds after scandal

China will launch a nationwide audit of provincial and city-level social security funds in the wake of the scandal in Shanghai over the alleged misuse of pension monies by senior leaders in the country’s financial centre.

Li Jinhua, the head of the National Audit Office, said the checks would begin in 2007 in an effort to ensure that no other large government pension funds had also been misused, as happened in Shanghai. “As this issue has drawn much public attention, all government departments have launched investigations into these funds,” Mr Li said. “We are planning to start a nationwide audit of social security funds from next year.”

The audit would be restricted to the larger funds, at the provincial and city level, because of the difficulty of going through the thousands of smaller ones operated by counties and below, he said.

Under Mr Li, the auditor’s office has gained a high profile in China by publicly exposing official corruption and misuse of funds.

Mr Li pledged he would continue to publish reports detailing misdeeds uncovered during audits, a relatively novel approach in China, but one that has proved popular with the local press and public and helped bolster the prestige of his office. “We will publicise our audits, except in areas which contain state or commercial secrets,” he said.

The misuse of social security funds is especially sensitive because so many workers, sacked when their state enterprises closed, later discovered that their pensions had disappeared.

Chen Liangyu, the Shanghai party secretary and a member of the elite politburo, was sacked following the scandal, the most senior level official to be toppled for corruption in a decade.

At least a third of the $2.4bn (€1.8bn, £1.2bn) fund was siphoned off and given to a private businessman to buy a local toll road, according to details of legal suit filed in Shanghai to regain the money.

“The deepening of reform means there are fewer opportunities to commit crimes,” he said. “The core reason is the change in the overall environment. In the past, people who committed crimes thought they lived in a state where such things would never be noticed. They were not afraid.”

In 2004-05, the audit office referred 291 cases for possible prosecution for “major financial fraud”, all cases involving sums of more than Rmb100m ($12.7m).

The audit office investigates not just whether public monies have been used legally but also whether they have been spent efficiently and in line with government policies.

“We will also study the policy-level reason for the low efficiency in the use of funds,” said Mr Li.

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