Better pay is key to stamping out graft

The National Audit Office's anti-corruption movement, dubbed Audit Storm, has continued to send shivers through the national ministries. Following a scathing report last year which exposed wrongdoings in several ministries, its latest report published last week has unearthed misappropriations in 32 ministries and governmental organisations, ranging from the Foreign Ministry, the National Development and Reform Commission to the Red Cross Society of China.

This and other reports published by the audit office over the past year have revealed that almost no government ministry is free of financial misconduct. The auditors have found that four kinds of malpractices are endemic - using official funds to start businesses or speculate in the stock market, seeking more funds than necessary for specific projects, stacking slush funds in secret accounts to pay for staff welfare and collecting unauthorised fees for bogus reasons.

The only encouraging note is that many of the misappropriations uncovered in the latest audits dated back many years. However, it is too early to say if there have been fresh breaches since a new set of rules against misconduct was promulgated last December. Under the Regulation on Financial Malpractices, government departments can be fined up to 50 per cent of the funds involved for breaching financial rules, compared with 30 per cent previously. Officials held responsible can also be fined up to 30,000 yuan, compared with three months' salary before.

To outsiders, it is an oddity that a department can be fined for misappropriation when all its funds come from the central coffers and the fine will affect its service provision. Fining the responsible officials would seem a more reasonable course of action. Last year, during the six months after the audit office released its report, about 700 officials were punished for their mistakes and 21 billion yuan recovered. For unexplained reasons, however, not all wayward officials have been disciplined.

At its root, financial misconduct among mainland officials is caused principally by their poor pay and the departments' lack of transparency and accountability. The experience of Hong Kong and elsewhere is that the best way of stamping out misappropriation and corruption is to pay officials well. As long as officials' salaries and other perks lack behind market rates, the temptation for them to line their own pockets with official funds will remain high.

Introducing 'sunshine' rules requiring officials to declare personal and family assets would help, as would the establishment of an effective system of institutional checks and balances to ensure all levels of government abide by the rules. Setting up a Hong Kong-style graft fighter like the Independent Commission Against Corruption would be a welcome step.