In response to Tuesday's government auditing revelations, several ministries and companies promised yesterday to improve their financial management.

The Ministry of Health said it had ordered hospitals named and shamed in Auditor-General Li Jinhua's report to follow his recommendations for improvements, according to a report by China Central Television (CCTV).

According to the auditor's report, ten hospitals in Beijing overcharged patients between August of 2003 and August of 2004, running up excess fees totalling 11.27 million yuan (US$1.36 million).

Attempting to explain why records showed he had kept a total of 1.385 billion yuan (US$167.5 million), Wang Aiguo, vice-director of the planning department of the Ministry of Water Resources, was quoted by CCTV as saying that some of the projects the money was intended for are awaiting approval and some others are undergoing further planning.

Safely stored in a bank account, none of the money has been misused, he said.

President of China Great Wall Asset Management Corp, Wang Xingyi, said the company had already made improvements and would try to strengthen internal management.

Xinhua said China Cinda Asset Management Corp had already acted to punished 24 people responsible for irregularities.

Li's report was announced to the Standing Committee of the National People's Congress on Tuesday.

Ministry denies misuse of funds

The Ministry of Water Resources said it did not misuse reserved funds, after the nation's top auditor said it had reserved 1.38 billion yuan (US$167 million) by the end of 2003.

The ministry said the funds were not sent to projects in time because some projects had not completed approval procedures. "The funds stay in accounts and are not misused," the ministry told Xinhua News Agency on Wednesday.

The Ministry of Water Resources was regarded as a "habitual offender." From 1999 to last year, the National Audit Office often found it embezzled public funds to build hotels and increase staff welfare, Xinhua News Agency said.

The National Audit Office said in its annual audit report to top lawmakers Tuesday that 38 departments of the Central Government misused 9.06 billion yuan (US$1.09 billion) in 2004.

Irregularities were found in the State Sports General Administration, the National Tourism Administration, as well as hospitals, universities and some major State-owned enterprises.

The Ministry of Education said it was "carefully studying" the problems exposed by top auditor Li Jinhua, who said 18 public universities improperly collected 868 million yuan in tuition fees.

The Ministry of Health said it was urging hospitals to rectify problems pointed out by Li. The top auditor said 10 Beijing-based hospitals accepted as much as 300 million yuan from suppliers in kickbacks, and overcharged patients by 11.27 million yuan from 2003 to August 2004.

The State Sports General Administration said it was "studying" the audit report, which said the administration agreed its lottery management center to pay excessive lottery distribution fees to two companies, which then paid 37.5 million yuan to the administration.

China Huarong Assets Management Corp. said it "had followed proper procedures" in using 40.92 million yuan of State assets to buy houses for its staff.

China Great Wall Assest Management Company Corp. said it had punished those who sold 33 flats at half of the market prices to staff members.

As of March 2005, 762 officials had received penalties after their embezzlement of public funds was disclosed in the 2004 audit report.

Effective check on gov't bodies crucial

Each year when the head of the National Audit Office (NAO) publishes his annual report, there are always examples of scandalous deeds, such as the mishandling of public projects and misuse of State funds.

The 2005 list includes a real big name: The National Development and Reform Commission (NDRC).

Auditor-general Li Jinhua, in his report delivered to the National People's Congress Standing Committee on Tuesday, criticized the commission for five counts of wrongdoing, ranging from approving State subsidies for road projects based on fraudulent applications to foot-dragging over major State investment projects.

Problems with the NDRC heard here are not as sensational as corruption and embezzlement cases some State auditing reports have revealed.

But they are still alarming enough if the NDRC's pivotal role in our national economy is taken into account.

The problems exposed in Auditor-general Li's report indicate that our major economic decision-making bodies, such as the NDRC and the Ministry of Finance, should be put under closer scrutiny to ensure they perform their duties properly and to avoid power abuses.

The NDRC, formerly known as the State Planning Commission, used to be the country's top economic decision-making body.

It determined economic development programmes in the entire country, as well as all major investment and production plans of the central government and its enterprises.

Now investment and production decision-making rights have largely been given to enterprises as the country moves from a planned system to a market economy.

But the launch of very big industrial projects is still subject to endorsement by the commission.

What is more important is that the NDRC remains a major decision-maker on infrastructure projects in sectors including transportation, power and agriculture.

It has the final say on whether a project is needed, how much money the State will invest and how to divide the money between different areas.

Each project could easily swallow billions of dollars and could have major environmental implications.

So any mistakes in these projects either with their feasibility studies, detailed investment plans or implementation can lead to huge waste or environmental damage.

Examples of ill-conceived projects are not rare. Some airports and roads have proved redundant. The spreading dam-building craze is also putting local environments at risk.

Misjudgment by the NDRC can also result in shortages of public goods. A handy example is the current power shortage which, to a large extent, can be attributed to the commission's suppression of the power sector's development in the 1990s in the belief that power was in over supply and would continue to be so.

Over the decades during the planned economy era, people at the State Planning Commission developed a sense of superiority, which has now been inherited by some NDRC staff.

Local officials and enterprises complain that some NDRC bureaucrats still dwell on their past role as meticulous State planners.

In the meantime, supervision over such a powerful institution is weak.

The National People's Congress (NPC) deputies listen to the NDRC's work report only once every year. NPC Financial and Economic Committee members only occasionally make comments about the commission's work.

NAO supervision has proved to be the strongest. The NAO picks its auditing priorities every year, as it cannot focus on every ministry and commission every year.

A more regular, effective and systematic approach is badly needed in checking the work of major government bodies such as the NDRC in order to make them accountable for their mistakes and misbehaviour.

(China Daily, Shenzhen Daily June 30, 2005)