Li Jinhua, the nation's top auditor, revealed on Saturday that just 344.4 billion yuan (US$43 billion) of the 773.3 billion yuan (US$96.7 billion) allocated in 2005 by the central governments for various types of local government projects could actually be found in the budgets of those local governments.

And the finding was the result of an audit of the budgets of just 20 provinces, autonomous regions and municipalities.

Yet it is indeed surprising that it was impossible to track down more than 50 percent of this money allocated by the central government.

Auditor-General Li explained that the central government earmarked funds mostly for specific purposes, and that these special funds pass through dozens of departments on their way from the central authorities to where they are actually needed.

He compared this entire process to a canal that is far too long, in which the money is the water flowing to the destination, but only a little gets there, with most of it seeping away during the process.

This means that there was no monitoring of how the money was distributed by people's congresses or the supervision departments of those local governments in question.

With no due supervision, the money could have been diverted to the coffers of local government departments for their own use, most probably being spent on projects that benefited staff members or, in the worst case, finding its way into the pockets of the heads of these departments.

Even if none of this money was actually embezzled, and it was just used for other purposes, the efficiency of the central government's financial expenditure could be impaired, and so could the central government's development strategy.

If a sum of money the central government has allocated to aid impoverished farmers in a certain area is not put into the budget of the relevant local government and is then used instead to build apartments, the villagers would mistakenly believe that the central government did not care about their problems.

Taxpayers, who do not know how the taxes they have paid are used, would get increasingly angry about the misuse or abuse of their money, and then lose confidence in the government.

To solve this problem, supervisors might first follow the flow of a particular special fund from the central government to its very grass-roots destination to find out how the money was nibbled away. Then a mechanism might be established to simplify the process so that the special funds could reach their destinations in their entirety.

(China Daily June 5, 2006)