The construction of 34 audited high-grade highway projects was mostly launched in the Tenth Five-year Plan period and these projects are all important sections of the trunk national highways in the network of five vertical and seven horizontal lines or trunk regional highways with the total built mileage of 5,324 kilometers (including 4,184 kilometers of expressway) and a total of estimated investment of 166.
2 billion yuan. The mileage and estimated investment represent respectively 17% and 16% of the mileage and estimated investment of the construction of high-grade highways of our country in the Tenth Five-year Plan period. 24 of the 34 projects are located in the central and western parts of the country.
By the end of 2005, 127.6 billion yuan had been invested in these 34 projects and 28 projects of them had been put into operation with the remaining ones expected to be completed in 2006 and 2007.
The audit findings indicate that while accelerating the construction of highways, the transportation authorities at various levels and the relevant local governments paid adequate attention to the management of projects and the management capacity of construction was somewhat improved. The Tenth Five-year Plan period was the time when our highway construction witnessed the fastest development with a total of 350,000 kilometers of new highways built.
Of the total, 24,700 kilometers were expressways, surpassing the total mileage of expressways built before 2000. Thus tangible progress was made in the construction of highways. To enhance the supervision of the highway construction projects, the Ministry of Transportation issued successively in the Tenth Five-year Plan period the regulations and regimes on standardizing bidding invitation and submission, procurement of equipment and materials, changes in design and fund appropriations and achieved tangible effects.
The local governments at various levels and transportation authorities continually improved management regulations, enhanced preliminary work of the projects, strictly enforced quality control so that the quality of projects showed marked improvement. The legal-person system, bidding invitation and submission regime, project inspection and contract management regime were generally adopted by the 34 audited highway projects.
The management of projects and fund was gradually strengthened and overall the projects were of good quality. Seven of the projects were rated as high-quality projects.
The local governments and transportation authorities at various levels carefully organized the construction, with 28 among the 34 projects being completed and open to traffic on time or ahead of schedule. The mileage of the highways already in operation amounted to 3,678 kilometers and they have initially produced economic and social benefits.
One, the transport capacity has been markedly enhanced. For example, the completion of the Xinxiang-Zhengzhou section of the Beijing-Zhuhai Highway not only linked up the Anyang-Xinxiang and Zhengzhou-Xuchang expressways, effectively eased the traffic pressure on the old Yellow River Bridge and the No.
107 national highway, but also increased the traffic flow to the daily total of 14,500 vehicles in the following year after its inauguration. Two, economic and social development has been facilitated. For instance, after its completion, the Guang an-Nanchong Highway in Sichuan Province connected Chengdu Municipality , Chongqing Municipality with central and eastern Sichuan Province and made it possible for Chengdu Municipality and Chongqing Municipality to play their radiating role and boosted the economic development of the areas along the highway.
After the opening to traffic of the Xiangtan-Shaoyang Expressway in Hunan Province, the travel time between the two cities was cut back drastically and the number of tourists and tourism revenue of the tourist destinations including Xiangtan in 2004 increased by 30% than in 2002.
Two, a small number of local leading officials, by taking advantage of their powers, illegally intervened in bidding invitation and submission to rake in personal gains, which led to serious losses in state assets. For instance, the former director of the Transportation Bureau of Qingdao and others, in the construction of the Qingdao section of the expressway from Tongjiang of Heilongjiang Province to Sanya, Hainan Province, allowed a casual laborer to undertake the contract fraudulently in the name of another company and calculated the expenditure of the project at a higher cost than the actual one, leading to the loss of 13 million yuan of highway construction fund.
Since 2001, the former chief procurator of the Dazhou Municipal Procuratorate in Sichuan took advantage of the powers of the Procuratorate to supervise and prevent job-related crimes of communications departments, therefore undertook for the sake of his relatives the slope greening project of the Dazhu-Qiujiahe Linshui Expressway.
2.49 million yuan of illicit profit was made through apparently higher per-unit pricing than similar projects in the locality in the settlement document.
One, transportation administrative authorities or their subsidiary units in the six provinces and autonomous region including Hunan and Guangxi, making use of related transactions, extracted 196 million yuan of construction fund. For example, since 1999, the Capital Construction Administrative Bureau of the Transportations Department of the Guangxi Zhuang Autonomous Region, in the form of collecting consultation fees by its subsidiary Staff Technical Association, illegally extracted, held back, and divided up 26 million yuan of construction fund.
Since 2000, the Staff Technical Association of the Hunan Provincial Expressway Construction and Development General Co., taking advantage of its working relationship with its superiors and in the so-called joint ventures , helped construction units undertake projects and illicitly collected 10.9 million yuan for use in starting up private businesses and bonus distribution for its superior units.
From 2000 to March 2005, the gravel yard under the Departmental Affairs Center of the Transportation Department of the Inner Mongolia Autonomous Region, by providing gravel to the Hohhot-Laoyemiao Expressway, squeezed 12.79 million yuan by means of listing fake production cost. 70% of the sum was handed over to the Transportation Department of the autonomous region (by the time of the audit, 4.
13 million yuan being already used for hospitality allowance and subsidies) and the remaining 30% was given to the construction unit of the project.
Two, the construction units of 26 high-grade highway projects in Jilin and Shaanxi provinces held back and misappropriated 1.962 billion yuan of construction fund. By the end of 2004, the construction unit of the Siping-Baishan high-grade highway in Jilin Province had misappropriated 96.08 million yuan of construction fund for use in other highways and public works projects and included 72.
26 million yuan of expenditure in public works into the construction cost of that high-grade highway. The Shaanxi Provincial Expressway Development Co., in the procurement of materials undertaken by the company for two expressways, raked in 77.27 million yuan of profit in violation of the regulations through collecting material purchase and storage fees from the construction unit and joint bidding agent fees from the material provider.
The money was used for the construction of other projects and daily expenses of the company. In some construction units, the administrative fees overspent above the budget seriously. For instance, from August 2003 till the time of this audit, the construction unit of the Hechi-Nanning high-grade highway of Guangxi, cooked various excuses and arranged 20 overseas trips for 141 people, which incurred the expenditure of 9.
77 million yuan.
One, mistakes in surveying and design, violation of the procedures of capital construction and blindly speeding up work in 16 projects led to 2.718 billion yuan in losses, waste and increase of investment. For example, after some leading cadres of a design agency in Guizhou Province accepted 2.96 million yuan of bribes, they, in violation of the regulations, subcontracted the geological survey of the Zunyi-Congxihe Expressway to 10 units.
As some of their surveying personnel were not qualified, serious discrepancies appeared between the result of the survey and the actual geological situation, which led to 720 million-yuan over-investment and waste. In the construction of the Hohhot-Laoyemiao Expressway the transportation department of Inner Mongolia, in order to speed up the construction, shortened the original time limit for the project from 4 years to 28 months.
Moreover, it invited bidding on the basis of the preliminary design which was not approved. Later because of the differences between the preliminary and the approved designs, the volume of the actual spoil was 5.13 million cubic meters more than the volume of spoil prescribed in the design so that the investment increased by 38.
27 million yuan.
Two, in 10 projects, due to inadequate examination of the construction units and the cheating of a small number of engineering and technical staff, the project cost was over-estimated by 529 million yuan, accounting for 9% of the contract value. For instance, some personnel of the construction unit of the northeastern section of the Wuhan Ring Expressway and inspectors, after seeking and accepting more than 3 million yuan of bribes, allowed and even helped the construction unit to submit an inflated volume of work, raise per-unit prices in contravention of the regulations and paid more project cost in violation of the contract and extracted more than 24 million yuan of construction fund.
From August 2002 to March 2003, a construction enterprise undertaking the work of two tunnels of the Zunyi-Chongxihe Expressway in Guizhou Province, by means of making fake product quality check sheet, purchase bills, inflated materials procurement and consumption and extracted 19.05 million yuan of project fund.
I. 15 projects, without examination and approval, grabbed or over-requisitioned 102,900 mu of land (one mu equals 1/6 of an acre) and, for 1,370 mu of land, the nature of use was changed arbitrarily or was not converted back to farmland in compliance with the regulations, which acts violated related regulations.
For instance, the Hugezhuang-Xishatun section of the Sixth Ring Road of Beijing that was built starting August 2001 and operated since October 2002, requisitioned 6,817 mu of land during its construction. The Beijing Municipal Government, however, applied to the Ministry of Land and Resources for permission for the requisition of the land as late as in 2003.
10,400 mu of land was approved for use in the construction of the Zunyi-Chongxihe Expressway in Guizhou Province, yet actually 17,700 mu of land was requisitioned, 7,300 mu more than the figure approved. Till the time of this audit, 263 mu of land in the Guang an-Nanchong Expressway project still awaited its conversion back to farmland.
More than 50 mu of the land was already used for an aquatic farm with the rest being left idle. The 268 mu of land which the Guang an Municipal Government requisitioned in contravention of the regulations was not used for highway construction and 11 mu of the land was auctioned to grab 6 million yuan of profit.
II. 21 projects in 14 provinces (autonomous regions) including Hubei, Hunan, Sichuan and Yunnan should pay farmers 5.17 billion yuan of compensation for requisitioned land. However, of the sum, 1.639 billion yuan was held back, misappropriated, deducted or defaulted upon for a long time by the local governments and departments in charge of land requisition or housing demolition and resident relocation.
For example, the project of the northeast section of the Wuhan Ring Expressway requisitioned 10,300 mu of land and the compensation standard per mu should be 18,900 yuan. In fact, they paid farmers only 4,800 yuan for each mu with a total of 145 million yuan less paid to the farmers. 195 million yuan of the compensation fund of the two projects of Dazhu County-Qiujiahe Lishui Expressway and the Guang an-Nanchong Expressway in Sichuan Province was misappropriated by the local governments and their subsidiary departments, accounting for 46% of the total, for use mainly in public works, construction of development zones and expenses of government agencies.
The departments in charge of land requisition and housing demolition and resident relocation of 3 expressways including the Xiangtan-Shaoyang Expressway in Hunan Province spent 160 million yuan of working expenses from the fund for land requisition and housing demolition and resident relocation. The amount was 12.
3 times more than the standard for working expenses prescribed by the provincial government. They misappropriated 148 million yuan from the above fund for purchasing cars, distributing subsidies and bonuses. At the end of 2005, the Yuanjiang-Mohei Expressway in Yunnan Province was open to traffic for two years, yet 25 million yuan of compensation for requisitioned land was not paid to farmers who lost their land.
By the end of 2005, among the 20 projects which were open to traffic for more than one year, the actual traffic flow of 14 projects reached only 60% of the estimates in the feasibility studies. As a result, their loans could hardly be paid back within the designated time limit. For instance, since September 2004 when the western section of the Harbin Ring Expressway was open to traffic, the average daily traffic flow was 1,761 vehicles, representing only 13.
8% of the estimate in the feasibility study. Its annual revenue, after subtracting operational and maintenance expenses, was only enough to pay the loan interest of a quarter of a year. 92% of the construction fund of the Siping-Baishan high-grade highway in Jilin Province, which was completed and open to traffic in August 2004, was bank loans.
Calculated on the basis of 5% of annual interest, the annual interest should be 150 million yuan. The project had 65 million yuan of revenue from tolls in 2005 and its daily traffic flow and annual revenue both represented 35% of the estimates in the feasibility study. Since the inauguration in 2004 of the Lanzhou-Lintao Expressway of the No.
212 national highway in Gansu Province, its revenue from the tolls was less than 40% of the loan interest due in the same period of time. The pressure of loan repayment was indeed overwhelming. Of the fund already allocated for the Huxian-Mianxian Expressway in Shaanxi Province, 1.15 billion yuan was from central government financing including vehicle purchase tax and the remaining 3 billion yuan was exclusively bank loans.
The 3.77 billion yuan of fund which the provincial transportation department promised to provide was not all appropriated. It is estimated that after the completion of the project, the project will pay 6.76 billion yuan more of loan principal and interest than estimated figures in the feasibility study.
First, the construction management system has not been straightened out and the reform is lagged behind development speed. At present, the construction, fund raising and repayment of loans of quite a number of highways projects mainly depend on the governments. Objectively, it has accelerated the construction of highways, but a small number of local governments have proceeded too fast in building highways, which is by far too much of a burden for local finance.
Moreover, in the construction of projects some departments in charge are policy makers, administrators and builders at the same time, which led to an inadequate corporate governance structure in those projects and, with an imperfect supervisory and restraining mechanism, it is easy to occur the problems of powers-for-money deals and illegally seeking interest for the unit and small groups.
Second, .the mechanism to investigate responsibility is not fully implemented. The state has explicit laws and regulations on the management of the construction of highway projects. But some local governments and project construction units stressed on the quantity and constructing speed of highway projects so as to neglect project management and the interests of the masses.
They did not rectify timely the problems discovered in successive examinations, nor did they impose sanctions on persons involving the problems in accordance with the law, which agitated the continued irregularities and illegalities of holding back and misappropriating construction fund, illicit subcontracting and contracting out, illegal land requisition and defaulting on compensation fund for requisitioned land.
Third, some local governments, in order to get the approval of projects, over-estimated the traffic flow in the feasibility studies, exaggerated the anticipated results so that the traffic flow after the completion of the highways could not reach the expected figures, leading to low rates of assets utility.
Some localities built highway projects beyond their financial means, so low rates of fund were allocated in the process of construction, forcing them to increase bank loans by big margins. As a result the operational revenue of the highways was not sufficient to pay back the principal and interest of the loans.
In compliance with the relevant laws and regulations, the CNAO handled the irregularities and illegalities discovered in the audit in a timely manner and issued audit opinions and audit recommendations. The Office referred 34 cases of irregularities and illegalities to judiciary departments, disciplinary and supervisory departments in accordance with the law, 16 cases to transportation authorities.
81 people were investigated for their criminal responsibilities according to law or penalized in compliance with the Party and government discipline. In view of the problems found in the audit, it is recommended that the Ministry of Transportation, local governments and project construction departments take corrective acts and look into the responsibilities in accordance with the law.
It is also recommended that the reform of the investment management system of high-grade highways be accelerated and the transformation in functions of the local communications authorities at various levels be promoted. Support in fund raising, repayment of loans and scientific and technological innovation in highway construction of the central and western regions should be further enhanced.
The management of land used for high-grade highway construction should be strictly enforced and the management method of the compensation fund for requisitioned land and its use be improved. A sound system of responsibility investigation should be established and improved.
The Ministry of Transportation organized the related departments in earnestly studying the audit recommendations and put forward four measures: one, boost the rectification of the problems discovered in the audit, enhance the investigation of responsibilities, and gradually perfect the industrial management regime and operational regime; two, speed up the reform of highway investment system, enhance industrial supervision and self-discipline and rectify the practice in some localities where leading officials of transportation authorities are concurrently representatives of legal persons; three, actively adopt supportive and preferential policies favoring the central and western regions in terms of the arrangement of annual construction fund and allocation of special funding for scientific and technological research projects in the transportation sector of the western region; four, strengthen the management of the requisitioned land for highway construction, strictly control the scope of land use and help the related local departments do a good job in the compensation for requisitioned land and housing demolition and resident relocation in order to really preserve the interests of the farmers.
(1) The management of project construction was enhanced. In view of the problem of not strictly implementing the regime of bidding invitation and submission, the relevant transportation authorities and proprietors of projects criticized through a circular the units which breached the regulations in subcontracting and contracting out and took back from the bid-winning units 11.
63 million yuan of illicit profit with the remaining illicit profit being recovered. With regard to the quality defects in the projects caused by non-qualified construction teams or shoddy work and inferior materials, the transportation departments in Guizhou, Anhui, Chongqing and Zhejiang investigated the responsibilities of the original contractors according to law, requesting them to re-do the work and take effective remedial measures so that the construction of the projects would meet the requirements of the design.
The disciplinary departments of Sichuan Province and Qingdao city are investigating the persons responsible for the problems. The departments concerned of Zhejiang and Anhui provinces investigated the responsibilities of those who engaged in behind-the-scenes deals in highway construction and took back the profit fund reaped through regulation breaches.
The communications departments of Beijing, Anhui, Hubei and Zhejiang provinces (municipality) issued related rules to step up the management of the highway construction market.
With respect to the problem of holding back, misappropriating and extracting construction fund, the communications authorities of Hunan, Guangxi provinces and the Inner Mongolia Autonomous Region investigated and handled the problems of breaching discipline and law by the relevant units, stopped the business and service operations of the related economic entities and, in coordination with the disciplinary departments, took back illicit revenue.
32.74 million yuan of extracted fund was already regained with the remaining part being recovered. The transportation departments of Jilin, Shaanxi and Guangxi provinces formulated rectification plans and regained 740 million yuan of misappropriated construction fund. The issue of misappropriated 40.
05 million-yuan project cost was settled through accounting adjustment. As to the 148 million yuan which involved the application for readjustment in the estimate, application is being submitted in accordance with the prescribed procedures. Measures have been taken to raise fund for the repayment of 64.
16 million yuan of construction fund.
(2) The rectification of the problems in land requisition was stepped up. The governments and transportation departments of Beijing, Guizhou, Sichuan, Hubei, Hunan, Yunnan and Inner Mongolia provinces (autonomous region, municipality) conscientiously did a good job in rectifying the problems in land requisition in violation of the regulations and holding back, misappropriating and defaulting on compensation fund for farmers.
Six projects went through afterwards the formalities for land requisition and expansion of land use amounting to 22,800 mu. 689 mu of land was converted back to the original use by two projects. 396 million yuan of compensation fund for farmers requisitioned land held back or misappropriated by related departments was taken back.
114 million yuan of compensation fund for farmers requisitioned land was distributed to them in compliance with the regulations. Other work of converting land back to farmland and distribution of compensation fund for requisitioned land is now in the process.
(3) The reform of the management regime and mechanism of highway construction was deepened. The Ministry of Transportation will further boost the management on preliminary work of highway projects, step up the research on highway toll collection policy, raise the level of highway project management and policy-making, gradually set up an operating mechanism for probing highway sustainable development and offer preferential treatment and support to highway construction in the central and western regions in terms of planning, project identification, investment standards and annual fund allocation.
The provincial governments of Heilongjiang, Jilin, Gansu and Shaanxi organized relevant departments in formulating rectification measures and enhanced the management of feasibility studies of the projects.
