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Forty-eight government departments have been ordered by China's State Council to explain the misuse of 5.51 billion yuan (US$689 million) of central government funds last year. 

The State Council, China's Cabinet, will report to the legislature by the end of the year on measures to be taken to correct the budget problems according to a decision made at an executive meeting presided over by Premier Wen Jiabao in Beijing on Wednesday.

The State Council urged the departments to "conscientiously analyze their problems and immediately correct their wrongdoing and to give the Chinese people a serious, responsible and satisfactory reply."

A press release from the meeting said budgeting and budget implementation were "an important duty entrusted by the Constitution to the State Council" and all departments must rigidly enforce the central budget approved by the Standing Committee of the National People's Congress, China's legislature.

A source at the meeting said the State Council stood by the annual audit report delivered by the National Audit Office in June on misused central funds last year and the rectification orders of the legislature.

State Councilors agreed closing loopholes in the budget management system was a high priority and required central government departments to improve financial transparency and to make their revenue forecasts more accurate.

The press release said the State Council was discussing measures to bring revenue from the transfer of land use rights into the central budget and a package of fiscal and taxation policies targeting economic development zones.

The central government would reform the investment mechanism to ensure the functions and responsibilities of governments were separated from those of businesses.

The State Council also agreed to impose tighter controls on budget expenditure and to strengthen the auditing of central funds. It reiterated that departments and officials breaching regulations and misappropriating funds would be held responsible.

The State Council urged all departments to fully support auditing agencies and to be self-disciplined.

The meeting also discussed and approved in principle an outline for China's cultural development between 2006 and 2010 and a draft regulation on the management of Yellow River water resources.

(Xinhua News Agency July 6, 2006)