Auditor-General Li Jinhua yesterday said 1.4 billion yuan (US$170 million) were misused out of the 2003 budget.

In his audit report, delivered to the Standing Committee of the 10th National People's Congress (NPC), Li said malpractice cases were found in 41 out of the 55 central departments under investigation.

Most of the money, originally allocated for specific purposes, has gone into the hands of staff members or to office building construction.

Li chose the General Administration of Sports as an example. Since 1999, the sports administration misused 131 million yuan of funds from China's National Olympic Committee.

About 109 million yuan (US$13.2 million) of the fund was misused to put up residential buildings for the staff of the sports administration, and the rest was invested into companies, according to the audit report.

Misuse of funds for poverty alleviation was particularly serious in more than 590 poverty-stricken counties that were examined by the National Audit Office last year.

Li said most of the low-interest loans, which should have gone into the pockets of farmers, was used for traffic, electrical power and communication industries.

For instance, only 2.8 million yuan (US$340,000) in low-interest loans in Southwest China's municipality of Chongqing was allocated to farmers, accounting for merely 0.3 per cent of the total loans to aid the poor.

As a result, many farmers could not get soft loans and had to borrow money from rural credit co-operatives with an annual interest of 6 per cent, said Li.

The National Audit Office also discovered several illegal activities in sales of land-use rights in 10 cities around China while farmers were not adequately compensated for land expropriation.

For instance, a private company in Central China's Hubei Province allegedly defrauded more than 18 million yuan (US$2.2 million) from the compensation funds by colluding with a local township government.

And appropriation of farmland was rampant in some areas, such as the Oriental University City Co Ltd illegally renting at least 380 hectares of farmland to build golf courses at the border of Beijing and Hebei Province, said the report.

Li said the country's fiscal revenue last year topped 2 trillion yuan (US$242 billion) for the first time, a rise of 14.9 per cent year-on-year.

Although the figure gave officials reason to smile, the low economic returns of government-invested projects have given them some cause for concern, said Li.

He said a quarter of some 526 infrastructure projects nationwide were not completed as scheduled, and 119 out of 320 selected projects, although finished, cannot be put into full operation.

For instance, the construction of a gasworks in Central China's Henan Province, with an investment of 2.3 billion yuan (US$278 million), started 16 years ago and finished in 2001.

The gas market has changed a lot during the 16 years but local policy-makers failed to readjust the original plan according to the developing situation.

As a result, the gasworks ran in the red since it went into operation.

As to the tax collection circle, the audit office scrutinized 788 enterprises nationwide last year and found a total of 25.1 billion yuan (US$3 billion) were evaded in taxes between January 2002 and December 2003.

The tax bureau of Tangshan, a city in North China's Hebei Province, unlawfully allowed 13 local iron firms to defer tax payments of more than 1 billion yuan (US$121 million) since November 2002.

So far, more than 70 local officials involved have received punishments and two of them have been brought to the court.

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