Audit finds major flaws with SOEs

China's 11 large State-owned enterprises (SOEs) have been found to have violated the country's economic and anti-corruption policies in a number of ways, including the illegal construction of golf courses and the purchase of luxury cars, leading to punishments for 190 people, China's top auditing body said Friday.

The National Audit Office (NAO) released reports on 11 SOEs from different industries ranging from oil giants to major power utilities, based on audits of half of their financial revenues and expenditures in 2012.

Power generator China Datang Corporation was found to have invested 30.4 billion yuan ($4.9 billion) without approval, while China Resources invited 11.7 billion yuan worth of bids that violated regulations, the reports said.

Several affiliates under the oil giant China National Petroleum Corporation (CNPC) did not conduct an open bidding process for projects and purchases worth around 26 billion yuan.

Affiliates of China Resources purchased vehicles at numbers and prices far beyond the limits set by the State-owned assets watchdog, with the most expensive car bought reaching over 2 million yuan.

China National Tobacco Corp also violated policies, with its affiliates investing 681 million yuan to build golf courses between 2008 and 2010, which violates the country's economic and water-conservation policies.

Other irregularities included tax evasion and poor management of foreign investments.

A total of 190 company officials at the 11 SOEs, including 32 at bureau level, have been punished for policy breaches or mismanagement, the NAO said. It has also tracked several people for illegal economic activities and transferred them to related authorities.

All 11 SOEs responded that they have made corrections to their irregularities.

"Corrective actions have been implemented. The issues identified will not materially affect the overall operating results and financial statements of the company," the CNPC's listed unit PetroChina said in a statement Friday.

The NAO also noted that the SOEs have managed to retrieve and avoid losses amounting to 3.3 billion yuan.

The problems, some of which had been repeatedly found in previous audits, have exposed flaws in SOEs' corporate governance mechanisms, Liang Jun, a research fellow with the Guangdong Academy of Social Sciences, told the Global Times on Friday.

"SOEs should strengthen internal auditing to regularly check their operations, accounting and financial management," he said.

As SOEs like CNPC pledged to develop a mixed-ownership structure, having private or foreign investors join could serve as internal supervisors for them and help them avoid similar mistakes, Liang noted.