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No. 23 of 2013 (General Serial No. 165): Audit Results of the Draft Financial Final Accounts for Fulfillment of the Three Gorges Project
2013-05-22日   Soure : :

In accordance with relevant requirements of the NPC Financial and Economic Committee on the Three Gorges Project completion and acceptance and the plan of the State Council, the CNAO from June 2011 to February 2012 conducted an audit on the draft financial final accounts for completion of the Three Gorges Project. These include: draft financial final accounts for completion of the dam project 1 and power transmission project, compiled by China Three Gorges Corporation (hereinafter referred to as the Three Gorges Corporation) and the State Grid Corporation; draft financial final accounts of resettlement funds compiled by the State Council Three Gorges Project Construction Committee Office (hereinafter referred to as the Three Gorges Office). During auditing, hearing views on relevant issues was held many times with the Three Gorges Office, the Development and Reform Commission, the Ministry of Finance, Ministry of Environmental Protection, Ministry of Water Resources, the State Grid Corporation, the Three Gorges Corporation and other units as well as Chongqing, Hubei, Hunan, Shanghai and other provincial and municipal governments. By the end of November 2012, the problems disclosed in the audit have all been rectified. The audit results are hereby announced as follows:

I. Overview on the Three Gorges Project

A. Construction objectives and content.

In January 1992, the State Council executive meeting approved the review comments of the State Council Three Gorges Project Review Committee on the "Three Gorges Project feasibility study report". In April, the fifth session of the Seventh National People's Congress considered the "Motion of the State Council regarding submission for deliberation on the construction of the Three Gorges Project", and passed the "Resolution regarding construction of the Three Gorges Project". In July 1993, December 1994 and February 1997, the State Council Three Gorges Project Construction Committee (hereinafter referred to as the Three Gorges Project Construction Committee) successively approved the project preliminary design report, the reservoir resettlement compensation total investment budget estimate and scheme for dividing up the budget and assigning a part to each unit, and the power transmission system design budget estimate. Based on the results of the above deliberation and approval, the Three Gorges Project objectives are: focused on uplifting the flood control standard along the Jingjiang river section , that is ,from once in ten years to once every hundred years; coupled with other measures,  it is easier to prevent devastating disasters from occurring along the Jingjiang river section, mitigate threats to the Wuhan area and the lower reaches of the river from floods, give full play to integrated economic and social benefits of power generation, navigation, irrigation, water supply and economic development of the reservoir area. The main construction contents are as follows:

1. The dam project with the river dam, hydropower station, navigation structures included. The river dam for flood control has a length of 1,983 m, with a crest elevation of 185 m; the hydropower station has 26 installed units with a total capacity of 18.2 million kilowatts; the navigation structures consist of two lanes of five-stage locks and a single vertical ship lift, with annual one-way passage capacities of 50 million tons and 3.5 million tons respectively. The reservoir’s normal storage level is 175 m, with a total storage capacity of 39.3 billion cubic meters, of which the flood control capacity is 22.15 billion cubic meters.

2. Project for transmitting and transforming electricity. HVDC converter capacity of 18 million kilowatts, AC transformer capacity of 22.75 million KVA, power supply to 10 provinces and municipalities including Jiangsu, Guangdong, Shanghai, etc; length of transmission lines totaling 9,194 km, and supporting construction of automated dispatching system, relay protection, etc.

3. Reservoir resettlement. Reservoir resettlement planning includes relocation and housing construction for a population of 1,245,500, relocating and building 43.655 million square meters of housing, relocation of 1,632 industrial and mining enterprises, 12 cities (counties), 114 towns, and implementation of 1,087 cultural heritage conservation projects.

B. Budget estimate and funding sources.

Based on the determined construction content and using the price levels at the end of May 1993 as a benchmark, the Three Gorges Project Construction Committee approved a total static investment budget estimate of 135.266 billion yuan for the Three Gorges Project, in which 50.09 billion yuan for the dam project, 32.274 billion yuan for the power transmission project, and 52.902 billion yuan for resettlement funds. Affected by such factors as price and interest rate calculations, the dynamic total investment totaled 248.537 billion yuan, of which 126.385 billion yuan for the dam project, 36.499 billion yuan for the power transmission project, and 85.653 billion yuan of resettlement funds.

In accordance with the financing plan approved by the State Council, the sources of funds for construction vary, mainly from the Three Gorges Project Construction Fund, loans from the National Development Bank, reinvestment of power grid earnings and issuance of corporate bonds, foreign investment, etc. As of the end of December 2011, 207.873 billion yuan of funds have been invested in the Three Gorges Project construction. in which 161.587 billion yuan from the Three Gorges Project Construction Fund, 35.031 billion yuan of revenue from sale of turbines to the Yangtze Power Co., Ltd., 11.069 billion yuan from reinvested power grid earnings, 186 million yuan from capital construction funds and other special allocations. The funds, raised through loans from the National Development Bank and the issuance of corporate bonds during the construction process, have been repaid in entirety. In addition, during relocation and resettlement, the State also provided financial support through relevant policies.

C. Situation regarding draft financial final accounts of project completion.

According to the draft financial final accounts of project completion prepared by the Three Gorges Project Corporation, the total amount of financial final accounts of the Three Gorges Project is 207.873 billion yuan. Specifically:

1. The dam project. As of the final accounts benchmark date of December 31, 2008, the draft final account amount is 87.361 billion yuan, of which: investment in completed projects is 80.151 billion yuan, estimated investment in wind-up projects including the ship lift, clean up and improvement of the dam area, is 7.21 billion yuan. As of the end of 2011, these two wind-up projects have respectively completed 38% and 43% of their total investment.

2. Power transmission project. As of the final accounts benchmark date of December 31, 2008, the power transmission project has been fully completed, the draft final account amount is 34.859 billion yuan, in which: primary system project 32.295 billion yuan (DC project 19.224 billion yuan, AC project 13.071 billion yuan), secondary system project 1.232 billion yuan, special project charges 859 million yuan, total reserve fund 223 million yuan, and power grid dispatching building 250 million yuan.

3. Resettlement funds. As of the final accounts benchmark date of June 30, 2011, the resettlement funds, implemented through "full responsibility" for both tasks and funds and incorporated in the draft financial final accounts for completion of the Three Gorges Project, totaled 85.653 billion yuan, covering flood control, navigation and generation assets according to a 21:75:4 ratio. In addition, funding for resettlement also included derived funds from relevant supporting policies (interest on resettlement fund deposits, returned arable land occupation tax, transfer fees from use of land beyond set standard, etc.), a lump-some subsidy for three times of water storage ahead of schedule, industrial and mining enterprise closure and bankruptcy subsidies, etc., totaling 6.376 billion yuan 2. As of June 30, 2011, relocation and resettlement expenditures totaled 75.77 billion yuan, projects under construction or with settlement yet to be completed accounted for 16.259 billion yuan.

According to the draft financial final accounts for project completion, the Three Gorges Project formed assets of 207.873 billion yuan. Of which: 172.925 billion yuan delivered to the Three Gorges Corporation, including 17.987 billion yuan in flood control assets, 130.024 billion yuan in power generation assets, 24.755 billion yuan in navigation assets (including the ship lift and other wind-up projects), 159 million yuan in the dam reception center and other independent assets; 34.859 billion yuan in power transmission assets delivered to the State Grid Corporation; 88 million yuan in the Three Gorges Office building and other assets to be transferred out pending Ministry of Finance approval; 808,000 yuan was written off

II. Major achievements in the Three Gorges Project construction

Since 1992, under the correct leadership of the CPC Central Committee and the State Council, and strong support from people throughout the nation, and under the direct leadership of the Three Gorges Project Construction Committee, the project’s corporation and relevant local governments meticulously organized and successfully accomplished the Three Gorges Project construction tasks. According to the information provided by the Three Gorges Office and the relevant departments, units and local governments, the Three Gorges Project construction has scored remarkable achievements, and a great deal of useful experience and new approaches have been acquired in planning evaluation, construction management, investment control, technological innovation, and management innovation, providing a lot for us to draw upon in future construction and management of major projects in our country.

A. Various construction tasks fulfilled on schedule or ahead of schedule.

In carrying out the Three Gorges Project, the relevant parties focused on coordination and cooperation, promoting the work according to the set plan and in an orderly manner, thus ensuring construction progress and the fulfillment of the construction tasks on time.

First, the damming project. Except the approved postponement of construction of the ship lift (scheduled to be completed in 2015) and the added project of the clean up and improvement of the dam area, all the construction tasks in the preliminary design were fully accomplished in 2009, of which closure, water storage, power generation and navigation and other major controlling milestones were achieved on schedule or ahead of schedule: in 1997, river damming; in 2003, reservoir water storage reached 135 meters, two-lane five stage locks trial navigation on schedule, first batch of power generation units was connected to grid; in 2006, reservoir storage came to 156 meters, initial operation started a year ahead of time; in 2008, 26 generating units of 700,000 kilowatts capacity each in the left and right bank power stations were put into operation in entirety a year ahead of schedule; in October 2010, reservoir storage capacity reached the designed level of water as high as175 meters .

Second, the power transmission project. This project was completed and put into operation in 2007, a year ahead of the preliminary designed task. Through optimizing circuit design, the construction of three ±500 kV DC transmission lines were completed with a total length of 2,856 km, 6 converter stations with a total capacity of 18 million kilowatts; completed construction of 55 500 kV AC transmission line projects with a total length of 6,338 km, 33 transformer projects with a total capacity of 22.75 million KVA; at the same time, completed construction of dispatching, communications and other secondary system projects, ensuring that the Three Gorges power is "sent out, delivered, and used".

Third, relocation and resettlement. As of the end of 2011, the actual relocated and resettled population was 1,296,400, and 50.5476 million square meters of housing were relocated or reconstructed, an increase of 50,900 persons and 6.8926 million square meters respectively compared with that planned; relocation of industrial and mining enterprises, cities (counties), towns and cultural preservation units was fully completed as planned, initially realizing the goal of being able to "move out" and "maintain stability", ensuring the smooth progress of the reservoir water storage built in stages.

B. Overall quality of the project being superior.

In the construction of the Three Gorges Project, the relevant parties attached great importance to quality management; to this end they established and improved the quality supervision and management system, as to quality defects that emerged were all addressed in a timely manner. Quality of the first stage of the dam project was good, overall quality of the second stage superior, and quality of the third stage   good as well; since the dam project was put into operation, the working status of the structures has been on the normal track, and plant operation reliable. The fineness rate of individual project for transmitting and transforming electricity reached 100%, thus receiving 15 National Excellent Project Quality Awards and Design Awards; the system operation is safe and stable, with no grid security incidents occurring,  stoppage rates of the AC transmission lines arising from accidents in 2009 and 2010 were both 0.094 times per one hundred km, more superior than similar projects in the country (averaging 0.106 times and 0.199, respectively); accident rates of the DC transmission lines arising from stoppage in 2009 and 2010 were 2.3 times and 1.7 times per one hundred km respectively, about one sixth of the international average. So far 18,300 relocation projects have been completed and accepted, including resettlement housing, schools, hospitals, roads, bridges, etc., so to speak, the operation on the whole is so far so good.

C. Comprehensive benefits emerging.

First, the benefits the flood control project has yielded are obvious; the design goal is achieved of increasing the Jingjiang River section flood prevention standard from once in ten years to once in a hundred years. Since 2006, when the reservoir storage reached the 156 meters level, the Three Gorges Project began to play a key role in the flood control system of the mid- and lower- reaches of the Yangtze River, retaining peak flows over 50,000 cubic meters per second of flood waters nine times, two times of which the peak flow into the reservoir was more than 70,000 peak flow cubic meters per second (in 1998, the maximum peak flow into the reservoir was 64,800 cubic meters per second), after regulation and storage, the discharge was reduced to about 40,000 cubic meters per second, ensuring that the water level at Shashi did not exceed the warning level, effectively easing the flood control pressure on the Jingjiang River section and mid- and lower- reaches of the Yangtze River.

Second, the benefits of power generation are significant, and promoted the formation of an interconnected national grid. As of the end of 2011, the Three Gorges power station generated a cumulative 531 billion kwh of electricity, and transmitted 528.4 billion kwh, effectively alleviating the power shortage situation in central, east and south China. At the same time, interconnection of the central China power grid with the Sichuan and Chongqing grid, and the east China and south China power grids was realized, improving security and reliability of power grid operation.

Third, the benefits of navigation are prominent, the navigation conditions of the Yangtze River and the reservoir tributaries were improved, and navigation capacities of the reservoir ports increased. After the water storage project completed, unit transportation costs in the central line of the main channel along 660 km upstream of the dam decreased by approximately 37%. From June 2003, when the locks were open to traffic, to the end of 2011, a cumulative 550 million tons of cargo passed through the locks or over the dam, of which 100 million tons passed through the locks in 2011, 6.3 times that of 2003; annual navigable rate of the locks remained between 94.6 and 98.9 %, significantly higher than the requirement of 84.13% as designed.

Fourth, water supply benefits are being yielded, playing a positive role in improving water conditions across downstream area and alleviating drought. From 2003 to 2011, supply of water from the Three Gorges reservoir downstream during the dry season gradually increased, with a cumulative 564 water supply days, totaling 78.8 billion cubic meters; during the dry season, in the month with the lowest flow rate, while the mean flow into the reservoir was 3,670 cubic meters per second, the outflow was increased to 5,430 cubic meters per second.

Fifth, energy saving and emission reduction benefits started to manifest themselves, increasing the utilization level of clean hydropower energy. Based on standard coal consumption estimates of thermal power units of 6,000 kilowatts and above throughout the country from 2003 to 2011, as of the end of 2011, the use of hydropower generating capacity of the Three Gorges power station can replace 185 million tons of standard coal consumption of thermal power, reducing 422 million tons of carbon dioxide emissions, 880,000 tons of sulfur dioxide, 1.42 million tons of nitrogen oxides, and 632,600 tons of fumes and dust.

D. Production and living standards of the resettled population improved continually.

The Three Gorges Project resettlement work fully implemented the principles and policies stipulated by the central authorities; relevant localities actively carried out matching support work, promoting steady and rapid economic and social development of the reservoir area. The living environment of the resettled population and infrastructure in the reservoir area significantly improved; the production and living standards constantly improved; people's income grew steadily, the situation of the people resettled within the reservoir area and those relocated outside is on the whole stable. Taking 1997 as a benchmark, in 2011 the GDP of the Three Gorges reservoir area was 444.466 billion yuan, an increase of 6.71 times, with an average annual increase of 12.5%; local fiscal revenue totaled 47.439 billion yuan, an increase of 19.6 times, with an average annual increase of 24.1%; highway mileage open to traffic reached 82,200 km, an increase of 60,000 km, with an average annual increase of 9.3%; per capita disposable income of urban residents was 18,694 yuan, an increase of 3.19 times, with an average annual growth of 10.78%; per capita net income of rural residents was 6,427 yuan, an increase of 2.9 times, with an average annual growth of 10.33%; rural drinking water quality and water quality at urban drinking water sources in the main met requirements; urban sewage and garbage treatment rates were 72% and 77% respectively; national education system with local characteristics, including early childhood education, primary and secondary education, higher education, vocational education and adult education has been established and gradually improved; primary school enrollment rate has reached 99.9%; an urban and rural health care network and public cultural services network has been initially established, health care and hygiene conditions and medical security levels have   been on the gradual increase, 26,447 beds were added; 4.7875 million meters of radio and television lines and 5.9166 million meters of communication lines are constructed; and television coverage of the population is more than 97%.

E. Ecological and environmental construction and protection strengthened.

The Three Gorges Project attaches great importance to the implementation of policy measures regarding ecological and environmental construction and protection, by optimizing the environmental protection design and construction, tightening control over construction noise and the "three wastes" pollution, enhancing soil conservation, timely restoring vegetation in the construction area, adverse impact on environment was reduced. Water quality of the Yangtze River main channel within the reservoir area is generally stable, mostly better than category three. Soil erosion remediation area exceeded 18,000 square kilometers; sediment inflow into the reservoir decreased significantly, with an average annual inflow of 200 million tons, significantly lower than the design value of 530 million tons; reservoir sedimentation is better than expected. Effective measures were taken to protect rare and endemic plants and animals affected by the project. Prevention and control of geological hazards have seen initial results; 397 geological landslide control projects, 2,874 high cut slope protection projects, and 204 km of reservoir bank remediation were accomplished; more than 70,000 people were relocated to avoid danger; and a geological disaster monitoring and early warning system was established, setting up 251 professional monitoring points and 3,113 public monitoring and prevention points.

F. The construction itself playing an active and leading role in China's hydropower construction and its major equipment technology advancement.

In carrying out the Three Gorges Project construction the relevant units adhered to scientific and technological innovation, by ways of bringing-in, digestion, absorption and re-innovation; and the goal of home made large water-turbine generator sets, large castings and forgings and DC transmission projects has been achieved. Working together in design and cooperative production with foreign firms, as well as introduction of sophisticated technology from abroad, then digestion and absorption of core technology, relevant domestic firms have learned how to independently manufacture 700,000 kW hydropower generating units. The dam project received 21 national-level science and technology awards, and more than 700 patents. Through independent R&D, the hydraulic design of turbine rotors and all-air cooling technology of large hydropower units and other core technology have reached advanced international levels. AC power transmission equipment is now in the main based upon domestic manufacturing, and domestic production of DC transmission equipment has reached around 70%. The power transmission project received a national scientific and technological progress first prize award, 135 patents, obtained 170 major independent innovations, built key laboratories at advanced international levels, such as a pole and tower testing laboratory, and a power system electromagnetic compatibility laboratory, solved technical problems of dispatching, operation and security and stability control of super-large AC-DC interconnected power grids, and enhanced the overall level of domestic design, manufacture, construction and operation management of power transmission projects.

III. Audit Evaluation

The current audit on the draft financial final accounts for project fulfillment is based on the following criteria: the Three Gorges Project bill and the resolution to construct the Three Gorges Project examined and adopted by the fifth session of the Seventh National People's Congress, the Three Gorges project feasibility study report, the Yangtze River Three Gorges Project resettlement regulations, dam project preliminary design report, power transmission system design budget estimate and reservoir resettlement compensation investment budget estimate and scheme for splitting overall responsibility in blocks, etc., and the financial final accounts measures for completion of the Three Gorges water conservancy project approved by the Ministry of Finance. The audit results show that control of the Three Gorges Project investment is effective, static investment was controlled within the approved budget estimate, the actual amount of investment was controlled within the calculated range of dynamic investment, the project construction and financial management were as a whole up to norm, the fulfillment of the draft financial final account is basically in keeping with reality and regular.

A. Effective Investment control .

The Three Gorges Project implemented an investment management approach of "static control and dynamic management". With the support of good macroeconomic environment in the country and relevant state policies, the project investment was effectively brought under control, by optimizing design, technological innovation, bringing in a competition mechanism, strengthening construction management, optimizing financing options, as well as implementing a "full responsibility" system for both resettlement funds and tasks and other measures . The amount of static investment completed was 135.266 billion yuan, including: 50.09 billion yuan for the dam project, 32.274 billion yuan for the power transmission project, 52.902 billion yuan for resettlement funds , being consistent with the approved budget estimate; the completed amount of draft financial final account is 207.873 billion yuan, a reduction of 40.664 billion yuan compared with the estimated dynamic investment, of which the dam project reduced 39.024 billion yuan, and the power transmission project reduced 1.64 billion yuan.

B. Construction management being on the relatively regular track.

The Three Gorges Project established a project construction management system covering a government-led, enterprise managed, and market-oriented operation, and a resettlement work management system of "unified leadership, each province (municipality) being respectively responsible, and with county as basis", as well as supervision and inspection mechanisms such as follow-up auditing, annual inspection, etc. The project corporate responsibility system, tendering and bidding system, contract management system, and supervision system were well accomplished as a whole; subsequent to the enforcement of the Tendering and Bidding Law in 2000, the actual tendered amount of the dam and power transmission projects accounted for 92% of the amount subject to tender. Project corporate and relevant local governments earnestly implemented the state’s policies and regulations, stringently strengthened project construction management; management level constantly improved.

C. Regular Management of construction funds  as a whole.

The Three Gorges Corporation, State Grid Corporation, Three Gorges Office and relevant local governments conscientiously abided by the state’s financial laws and disciplines, rectified problems disclosed in audits and inspections in a timely manner as the construction went on, they established and gradually improved a range of funds management systems and financial management measures suited to the features of large-scale water conservancy project construction; the internal control system is also relatively sound. Construction funds for the Three Gorges Project were put in place in a timely manner, and the special funds utilized only for their special purposes.

D. The draft financial final accounts of project completion in line with facts.

In accordance with the measures for compilation of project completion financial final accounts and relevant regulations approved by the Ministry of Finance, the Three Gorges Corporation, State Grid Corporation, Three Gorges Office and relevant local governments compiled the project completion  of draft financial final accounts in a timely manner, which accorded with reality basically and fully reflected how the situation was regarding the source and use of funds, project construction and asset delivery, etc.

IV. Audit results and rectification

A. Audits and rectification in previous years.

Prior to the current audit on the project completion draft financial final accounts, in accordance with the requirements of the State Council, the CNAO had organized and carried out 6 audits on the dam project and power transmission and transformation project, and 13 audits on the resettlement funds. In dealing with the issue of 3.445 billion yuan of irregularities disclosed in the audits, the Three Gorges Corporation, State Grid Corporation, Three Gorges Office and relevant local governments attached great importance and carried out comprehensive rectification, in so doing they retrieved 2.453 billion yuan of misappropriated funds, recovered 106 million yuan of overcharged project costs, corrected issues of irregularly changing planned use of funds amounting to 886 million yuan, furthermore, they developed and improved 143 management systems and measures, and strengthened construction and funds management. The 76 cases of illegalities, violation of discipline and economic crimes that the audit transferred to relevant departments to handle have all been closed; the 113 persons involved have been prosecuted for criminal liability or received Party and government disciplinary sanctions.

B. The current audit on the project completion draft financial final accounts and rectification situation.

The audit showed that the Three Gorges Project completion draft financial final accounts overstated investments totaling 755 million yuan (accounting for 0.36% of the total final account), in which over-settled 357 million yuan in project costs (dam project -- 191 million yuan, power transmission and transformation project -- 166 million yuan), over-allocated 398 million yuan of construction costs (dam project -- 133 million yuan, power transmission and transformation project -- 265 million yuan); understated 158 million yuan of un-allocated construction costs. In addressing this issue, the Three Gorges Corporation and the State Grid Corporation have adjusted the final accounts and value of delivered assets accordingly, with a net reduction of 597 million yuan after balancing out the increase and decrease. The adjusted final account total amount is 207.276 billion yuan, in which the dam project being 87.195 billion yuan, the power transmission and transformation project being 34.428 billion yuan, and resettlement funds -- 85.653 billion yuan. The adjusted project completion financial final account of the Three Gorges project is as follows (Unit: 100 million yuan):

Item

Amount in draft final account

Reduction

Increase

Amount after adjustment

Total

2078.73

7.55

1.58

2072.76

Of which:Dam project

873.61

3.24

1.58

871.95

     Power transmission project 

348.59

4.31

0

344.28

   Resettlement funds

856.53

0

0

856.53

Note: According to the principle of "full responsibility" for both tasks and funds, this adjustment does not involve resettlement funds.

In addition to these adjustments involving the project completion draft financial final accounts, the audit also disclosed that due to difficulties in construction, long construction periods, heavy relocation and resettlement tasks, and imperfect relevant laws and regulations during the initial stage of construction, the construction and funds management of the Three Gorges Project came across the following problems:

1. Inadequate construction management, resulting in an increase of investment by 808 million yuan.

(1) In construction of the dam project, the relevant units failed to strictly implement contract stipulated compensation for material price spreads and labor costs, payment of tender agent fees, supervision fees and maintenance fees all beyond standards, at the same time with some parts and construction equipment remaining idle for a long time, resulting in an increase of investment by 695 million yuan. In this regard, the Three Gorges Corporation has identified the main bodies of being held responsible for, established and improved 43 systems to strengthen investment control and contract management, improved the management and supervision of all aspects of contract execution, and disposed of assets remaining idle for long periods.

(2) In construction of the power transmission project, due to the low design standard, assets remained idle for long periods, increasing investment by 113 million yuan. In this regard, the State Grid Corporation, through clearing up and transferring of idle assets, has utilized these as emergency backup equipment.

2. Resettlement funds were misappropriated, etc., involving 279 million yuan, mainly used for non-relocation projects, offsetting administrative expenses, etc. In this regard, resettlement management agencies in Chongqing Municipality and Hubei Province have fully recovered relevant funds, and continued to use them for subsequent resettlement expenses.

3. The design, construction, supervision and contract management of some medium and small projects were not up to standard, involving 4.13 billion yuan.

(1) In the dam project construction, 251 medium and small projects failed to conduct tendering as required, involving 1.339 billion yuan. In this regard, the Three Gorges Corporation conducted a self-examination item by item, strengthened bidding management of medium and small projects, through amending the " Management system for tendering and procurement (for trial implementation)" and developing the "Tender supervision and management measures", identified the tendering oversight responsibilities of supervision departments at all levels of the Corporation, improved the supervision and management of tendering and bidding evaluation of small and medium projects.

(2) In the power transmission project construction, 114 contracts which required public tendering took the form of invitation for tendering, involving 1.437 billion yuan; 14 bidding sections were irregularly sub-contracted out by 11 construction units, involving 227 million yuan. In this regard, the State Grid Corporation, based on a comprehensive clearing up and in-depth analysis, seriously dealt with relevant units responsible for irregular invitation for tendering, the persons responsible were criticized; irregular sub-contracting activities have been investigated and dealt with, and the "Management measures for tendering and procurement activities” have been revised and improved.

(3) In resettlement fund management, 217 construction projects and research projects failed to conduct tendering in accordance with stipulations, involving 982 million yuan; 161 projects were irregularly sub-contracted, involving 145 million yuan. In this regard, the Three Gorges Office and resettlement management agencies in Chongqing municipality and Hubei province imposed administrative penalties on 12 of the responsible units, formulated or revised 16 tendering and bidding management systems and tightened supervision and management to prevent such problems from happening again.

4. Compilation of resettlement fund final accounts and accounting handling of some resettlement management agencies and relocation units were irregular, involving 1.721 billion yuan. Among these, 32 resettlement management agencies and relocation units falsely listed 577 million yuan of resettlement funds into final accounts by way of appropriations based expenditures; 20 resettlement management agencies and relocation units had problems of incorrect revenue and expenditure accounting headings and transfers between expenditure categories and other issues, involving 1.144 billion yuan. In this regard, the Three Gorges Office and relevant resettlement management agencies in Chongqing municipality and Hubei province have adjusted the final account statements, relevant fiscal matters tackling and investment plans.

5. Collection of some resettlement derived funds was inadequate, their management and use were irregular, involving 855 million yuan. Among these, 8 resettlement management agencies failed to collect receivable land transfer fees and other derived funds amounting to 476 million yuan; 13 resettlement management agencies and relocation units failed to include derived funds for management in the resettlement investment plan, and instead used them directly for resettlement and other expenditures amounting to 3.79 billion yuan. In this regard, the Chongqing Municipality and Hubei Province People's Governments have fully collected the un-collected receivable derived funds, and has included the derived funds used directly for resettlement to be managed in the resettlement investment plan.

The audit also revealed that leads to 35 cases of alleged violation of law and discipline and economic crimes, involving 113 million yuan; in accordance with the law, have been transferred to relevant departments for investigation and tackling. As of the end of November 2012, 11 persons have been held accountable, and leads to the remaining cases are now under investigation.

In addition, during the current audit, other problems were found such as migrants collectively petitioning due to problems occurring in compensation distribution, prevention of geological disasters, and remediation of the reservoir area ecological environment; the CNAO reported to the State Council or forwarded to relevant departments and local governments 27 issues of audit information; relevant departments and local governments promptly carried out rectifications ; and thus  relevant policies and systems have been improved

V. Audit recommendations

In endeavor to conduct the overall acceptance of the Three Gorges Project, and better bring into play the comprehensive benefits of the project, the following recommendations are hereby set forth:

A. The final phase of the Three Gorges Project to be accomplished with high standards. The Three Gorges Corporation is required to strengthen the construction management of the ship lifting project, carefully organize the construction, complete the equipment manufacturing, installation and testing with high quality, ensuring that the project is accomplished on schedule and safely operated by 2015; the Corporation is required to make overall arrangements for managing the clear -up and further improvement in the dam area, so as to bring into play as soon as possible its role of security, defense and ecological restoration. The Three Gorges Office, and Hubei province, Chongqing municipality and other relevant local governments should strengthen supervision and guidance of unfinished resettlement projects. At the same time, it should continue to tighten fund management, to conserve investment, so as to ensure safe and effective use of funds.

B. Continue to work harder on the security, stability and prosperity of the lives of migrants. The Three Gorges Office, relevant departments and local governments should focus on imperfection in infrastructure and public service facilities, poor employability of migrants, etc. in the reservoir area; in accordance with the Three Gorges follow-up planning requirements, more efforts should be given to optimization of economic development structure, improvement of the level of public service and social security level of migrants in the reservoir area, to migrant employment skills training and employment guidance as well as to further improvement of production and living standards of migrants to ensure the progressive realization of security and prosperity for reservoir migrants . Meanwhile, carry out in-depth studies on the situation of emigrants, provide guidance to grass-roots governments to take effective measures to solve their practical difficulties, and promote better integration of emigrants into local production and living.

C. Further improve environmental protection and prevention of geological disasters. The Three Gorges Office, relevant departments and local governments should continue to strengthen environmental protection work such as water pollution control and riparian zone remediation, deal with the relationship between economic development and protection of water resources and ecological environment construction, improve the state’s strategic capability of ensuring water security; increase efforts in geological disaster prevention, constantly improve the long-term mechanism of geological disaster prevention, protect people's lives and property, and promote the all-round, coordinated and sustainable development of the comprehensive benefits of the Three Gorges Project.

D. Further improve the comprehensive scheduling capabilities of the Three Gorges Project. Relevant departments and units should accelerate the study and proposal of a management system scheme after normal operation of the Three Gorges Project, identify the management scope, objects, system, matters, etc., of the Three Gorges Project; adjust and optimize the Three Gorges reservoir scheduling and operation scheme in a timely manner, make ensuring  downstream flood control security, basic ecological flow rate and basic water needs for production and living of downstream rivers and lakes a principle of priority in scheduling and utilization, study the mechanism of downstream ecological and environmental response under different operating modes; step up efforts on standardization and upsizing of ships compatible with the ship lock size to improve navigation efficiency.

E. Conscientiously sum up experience acquired in the Three Gorges project construction management. The Development and Reform Commission and the Three Gorges Office should, working together with the relevant departments and Hubei Province and Chongqing Municipality and other local governments, sum up experience obtained in the Three Gorges Project construction and resettlement work in a systematic way, continue to deepen reform of the construction management system and gradually improve the decision-making and management mechanisms of major national investment projects.

[1 In accordance with the "Measures for the Financial Final Accounts for Completion of the Three Gorges Dam Project" approved by the Ministry of Finance, the scope for compilation of the Three Gorges Dam Project completion financial final accounts does not include the added Three Gorges right bank underground power station; completion financial final accounts for the underground power station shall be compiled separately. When the current audit was being carried out, the underground power station was still under construction, its completion financial final accounts have yet to be prepared, relevant descriptions and data contained in this report do not cover the underground power station. As soon as the financial final accounts for the completion of the underground power station are compiled, the CNAO will carry out a separate audit.

Derived funds, the lump some subsidy for three times of water storage ahead of schedule, industrial and mining enterprise closure and bankruptcy subsidies, are used for relocation and resettlement, and are treated and managed as resettlement funds. In the current audit, their management and use were audited. However, these three sums of funds belonging to policy-based investments, which were not incorporated in the resettlement compensation investment budget estimate, are not included in the construction costs of the Three Gorges Project either, and therefore not included in the Three Gorges Project completion financial final accounts.