The central government has sent a team of more than 100 to probe into misappropriation from the social security fund in Shanghai. The director of the city's labor and social security bureau has been dismissed as deputy to the National People's Congress.

Although the billions of yuan involved make this the biggest case of its kind in terms of money, it is still only one of many similar ones that have been uncovered in recent years.

The social security fund is compared to a purse containing money for the basic livelihood of retired residents. Who holds the string to that purse and how it can be loosened and tightened to keep what is within from depreciation is of great significance to the future life of millions of aged citizens.

Statistics reveal that more than 10 billion yuan (US$125 million) nationwide had been misappropriated from these special funds from 1986 to 1997, and relevant departments had received nearly 100 tips about misuse of such money from 2000 to 2005.

The State Council has repeatedly issued documents requiring special care of this fund and specifically reiterating how part of this money could be used to appreciate its value. A special bureau was established under the Ministry of Labor and Social Security in 1998 to supervise the management and use of this fund.

Yet the misappropriation of money from this purse still happens all the time. It seems that the current supervision mechanism cannot scratch in the right place. The supervision bureau can regularly send teams down to check the accounts of those grass-roots departments holding the purse string. But what if those offenders collaborate with bankers to rig the accounts?

The biggest case in Shanghai and many others have exposed some loopholes: Top leaders of social security fund management departments have absolute say over the use of those funds, and can lend the money to anyone they want; those who are directly in charge of the accounts can even use the money to buy stock shares themselves.

Another big problem is that these departments are under the auspices of local governments, which would sometimes employ administrative means to appropriate some money from this fund for purposes it should never be used according to the relevant rules. In these circumstances, those directly managing the fund would find it almost impossible to resist the decisions of their local government.

Although the Ministry of Labor and Social Security and the Ministry of Supervision will jointly organize special teams to conduct regular examinations of the collection, management and use of this fund, reform of the mechanism is indeed necessary to facilitate cross-supervision within the managing department so that no one, including top leaders, will have absolute power to use the money. Severe punishment must be meted out for those government officials who use their power to misappropriate money from this fund.

(China Daily August 29, 2006)