No.9 of 2016 (General Serial No. 240):

Real-time Audit Results of Government-Subsidized Housing Projects in 2015

In order to promote the comprehensive implementation of various policies regarding government-subsidized housing projects of the Party Central Committee and the State Council, from November 2015 to March 2016, the National Audit Office (CNAO) organized audit organs at various levels and conducted an audit on the planning, investment, construction, distribution, operation, etc. of national government-subsidized housing projects (hereinafter referred to as housing projects, including public rental housing, affordable housing, limited-price commodity housing and other affordable housing, and renovation of various types of shantytowns and rural dilapidated houses) and supporting infrastructure. The audit focused on 14.8 thousand housing projects, and conducted household surveys on implementation of renovation of 187.7 thousand rural dilapidated houses. The audit results are hereby announced as follows:

I. Overview of the Implementation of the Housing Projects and Main Achievements

According to the data provided by financial departments and related units, in 2015, RMB663.329 billion for the housing projects was raised at various levels of finance funds nationwide (of which RMB254.483 billion was from central finance), and RMB1.372535 trillion funds was raised through bank loans, issuance of corporate bonds and other social financing channels by project units etc.. The audit examination showed that in 2015 affordable housing and renovation of shantytowns started construction of 1.8492 million units and 6.1228 million units respectively, basically completed 7.1589 million units of affordable housing and shantytown renovation resettlement housing, and rural dilapidated house renovation started construction of 4.401 million units nationwide, accounting for 108.93%, 104.96%, 146.71% and 101.87% of the targeted tasks respectively.

With respect to the auditing situation, in 2015, local governments at all levels and relevant departments earnestly implemented the decisions and deployments by the Party Central Committee and the State Council, actively promoted construction of housing projects including shantytown renovation and rural dilapidated house renovation, and created remarkable social and economic benefits.

(I) Urban and rural housing security system has continued to be improved. In 2015, by taking measures including strengthening management via target-oriented accountability system, innovating methods of investing and financing, improving construction of supporting infrastructure, and combining physical security and cash subsidies, various localities continued to improve the allocating efficiency of affordable housing. In the end of 2015, as many as 14.3369 million urban families benefited from housing subsidies, and 4.401 million rural dilapidated houses were renovated, increasing by 17% and 62% respectively over the previous year; the number of newly-added families that received rental subsidies was 412.8 thousand, the number of newly-added families that received public rental housing security for urban stably employed migrant workers was 477.4 thousand, and coverage was gradually expanded to urban resident population, promoting social harmony and stability.

(II) Effective housing supply of the housing projects has increased significantly. In 2015, the nationwide completion rates of starts of the housing projects, and basically completed affordable housing and shantytown renovation resettlement housing reached 105.85% and 146.71% respectively; 216 million square meters of affordable housing and shantytown renovation resettlement housing were completed, accounting for 21.48% of the area of the completed urban housing. Various localities intensified efforts on improving living conditions of public rental housing, shantytown renovation resettlement housing and other newly-built housing, and 400.58 million units of housing were newly-occupied through the year; in addition, 418.18 million poor rural households moved into safe housing, living conditions were improved significantly, and benefits for the people from multi-level housing security and supply system became more substantial.

(III) Shantytown renovation and construction of supporting infrastructure have been progressed in an orderly manner. In 2015, in various localities, the area of newly demolished and resettled shantytowns was 357 million square meters, 455.45 million units of shantytown renovation resettlement housing were newly started for construction, and 156.84 million shantytown households were resettled through direct cash compensation, government purchase, organized purchase of stock commodity housing and other ways. Central finance subsidized RMB146.4 billion for various shantytown renovation and supporting infrastructure construction, an increase of 41% from last year, greatly promoting shantytown renovation and construction of urban infrastructure including related city roads and public transport, communications, electricity, water, gas, heating, sewage and garbage disposal, enhancing the overall carrying capacity of cities and towns, and providing essential support for new urbanization.

(IV) Playing an active role in stabilizing growth, adjusting structure, benefitting people’s livelihood and preventing risks. In 2015, funds disbursed by finance at all levels on urban housing projects and rural dilapidated house renovation amounted to RMB581.311 billion and RMB52.843 billion, respectively, with 17% and 40.6% year-on-year growth. In the same year, China Development Bank and Agricultural Development Bank allocated project loans totaling RMB780.5 billion for the renovation of shantytowns and rural dilapidated houses, an 83% year-on-year growth. RMB1.54 trillion was invested in urban housing projects nationwide, accounting for 21.8% of urban residential investment. By resettling shantytown renovation by means of cash, etc., 1.7466 million units of commodity houses in stock were consumed nationwide. It was estimated that construction of the housing projects could stimulate social investment by RMB2.09 trillion, and it has provided a lot of jobs and played an important role in promoting stable and healthy economy growth.

II. Major Problems Found in the Audit

With respect to the audit, local governments at all levels, the relevant departments and units implemented earnestly the state’s policies and regulations; housing and urban construction, finance and other departments strengthened management; local governments at all levels intensified accountability; mechanism of the housing projects was gradually improved, and construction and management were progressively refined. The overall situation was good. The amount of housing project funds extracted or misappropriated found in the audit was 78% less than that of last year. However, the audit also found that there were still problems including deficient management and inadequate policy implementation in some localities and units.

(I) Special funds for housing projects in some localities were extracted or misappropriated. By fabricating false property information etc., 187 families in receipt of compensation defrauded RMB96.1788 million compensation for land acquisition and relocation. By overstating renovation households, repeated declaration, fabricating farmer roster and other means, 102 units extracted RMB272 million fiscal funds for urban housing projects and RMB183 million fiscal funds for renovation of rural dilapidated houses. 142 units misappropriated RMB486 million fiscal funds for housing projects (including RMB18.4764 million funds for renovation of rural dilapidated houses) and RMB1.322 billion bank loan and corporate bonds to cover the cost of work funds, building parks and venues, real estate development, offsetting financial budget etc. Besides, by deceitful declaration and false claim, intercepting and pocketing funds, charging “margins” and other means, 41 grass-root agencies and some cadres of villages and towns defrauded and misappropriated RMB14.4838 million subsidies for dilapidated house renovation (among which RMB12.4712 million was for rural dilapidated house renovation).

(II) Management and examination of housing project construction in some regions were deficient. 1,272 projects failed to go through the project bidding procedures during survey, design, construction, supervision and other sectors as stipulated; 809 projects had the problems of failure to obtain approval for construction sites, illegally providing “rough land”, arbitrarily changing land usage or volume ratio etc., involving 2,309.27 hectares land; 2,663 projects failed to go through basic construction approval procedures including project planning approval and environmental safety evaluation, or to take necessary quality control measures, and some had the problems of failing to construct according to engineering drawings and technical standards, dysfunctional or poor-quality housing etc. In addition, 75 construction and management units of projects defaulted on RMB2.203 billion project payment to contractors; 14 urban housing projects lost, dissipated, or disbursed additionally RMB104 million due to planning mistakes, inadequate management etc..

(III) Preferential policies on tax and finance in some localities were not in place. 891 urban housing projects in 232 cities or counties failed to benefit from RMB2.249 billion tax deduction for urban infrastructure supporting funds etc. as stipulated. Loans for 71 urban housing projects in 32 cities or counties had problems including being charged additional intermediate fees by banks, other financial institutions and financing platform companies, being attached unreasonable conditions and limited use etc., resulting in RMB185 million additional cost, involving loans and other finance totaling RMB2.214 billion; loans for 17 low-rent housing construction projects in 14 cities or counties failed to benefit from the 10% interest rate discount, resulting in RMB28.57 million additional interest, involving loans of RMB3.673 billion.

(IV) Some localities failed to comprehensively implement policies regarding shantytown renovation and supporting facility construction etc.. 348 shantytown renovation projects had problems including false data of resettlement with cash, failure to implement tasks as planned, and false report of completed volume of replacement tasks, involving 229.4 thousand sets of houses. Construction of directly relevant supporting infrastructure including road, water supply and power supply was slow in progress, leaving 190 thousand sets of houses unable to be deliverable on time. RMB47.86 billion special funds of 726 cities or counties accumulated had been unused for more than 1 year by the end of 2015, among which fiscal funds accounted for RMB24.703 billion, bank loans for RMB17.068 billion, and social financing including corporate bonds for RMB6.089 billion. 34 prefecture level cities failed to turn in value-added benefit balance of housing funds to finance for pooled use in pubic rental housing construction, and RMB12.495 billion had accumulated in housing fund management center.

(V) Allocation and consumption of urban and rural housing security resources were irregular in some areas. Due to weak basic management of housing security, deficient qualification inspection and withdrawal mechanism, inadequate dynamic management of housing guarantee objects, lax inspection and examination by administrative managing organizations etc., 48.5 thousand families who were not in poverty or had already received subsidies obtained RMB424 million subsidies for rural dilapidated house renovation; 58.9 thousand families, by concealing income, house properties and other information or not withdrawing while they should, irregularly enjoyed RMB60.4625 million cash subsidies for rural housing security and allocation of leases (sales) in kind of 37.7 thousand sets of affordable housing; 6,544 sets of affordable houses were used irregularly for sales, office operation, or renting out for business etc..

III. Audit Measures and Rectification

With respect to the above problems, auditing organs at all levels have submitted audit reports and issued audit decisions in accordance with the law. Matters related to alleged illegalities and irregularities found in the audit have been transferred to relevant departments for further investigation in accordance with the law.

Regarding problems pointed out by the audit, the relevant localities have shown great concern and are organizing rectification. As of late May 2016, relevant localities and units have recovered RMB1.294 billion of extracted or misappropriated funds, returned RMB596 million of overcharged taxes, comprehensively arranged and revitalized RMB17.742 billion funds, cancelled housing guarantee qualification or adjusted treatment for 59.9 thousand families, recovered RMB289 million of subsidies and allowance, cleaned up or recovered 15.9 thousand units of irregularly distributed and used affordable housing, improved supporting facilities and contributed to the delivery of 27.8 thousand units of housing, refined management and accelerated construction of 1,720 projects, held 797 people accountable for violations of Party disciplines or laws, and introduced or changed 829 relevant policies and documents. The remaining problems are being further rectified. The specific situations regarding rectification will be organized and publicly announced by the various provinces.

NO.9 of 2016 Attachment Major Problems Found in the Audit and Preliminary Rectification