A nationwide audit of social security funds has discovered severe loopholes such as lax supervision and embezzlement. This comes amid an ongoing investigation in Shanghai that has netted top officials in the financial hub.

The report at a cabinet meeting chaired by Premier Wen Jiabao came approximately two months after Shanghai's top Party chief, Chen Liangyu, was sacked for alleged involvement in the siphoning off of hundreds of millions of dollars from the city's pension fund.

"In some places, there exist problems including lax implementation of policies, poor management and even misappropriation and embezzlement (of the funds)," Xinhua News Agency quoted officials at a State Council Executive Meeting as saying yesterday.

"Some problems are relatively serious and great attention should be paid to them."

However the meeting did not give any specific cases of the misuse of the funds or any detailed figures.

Xinhua said the audit was carried out by the National Audit Office in September when the central government was widening a probe into the illegal investment of 3.2 billion yuan (US$410 million) from Shanghai's pension fund in speculative real estate deals.

The review targeted old age, medical and unemployment insurance funds for 2005 in 29 provinces, municipalities and autonomous regions except Tibet, Xinhua said.

The audit results, which will be made public at a later date, showed that the management and use of social security funds was "good in general," according to Xinhua.

Those at the meeting said social security funds are "high-voltage power lines" and should not be misused and embezzled by anyone."

It urged relevant departments and local governments to consciously rectify these problems found in the audit and refund the misappropriated and lost money within a set time.

"These problems involving violations of law and discipline should be thoroughly investigated to ascertain responsibility of relevant people," Xinhua quoted those in the meeting as saying.

It also called for more transparent management of social security funds, which had reached 1.85 trillion yuan (US$237 billion) by the end of last year.

"The collection, management, use and operation of social security funds should be made public regularly for supervision," those at the meeting said.

It was also agreed on at the meeting to punish with Party and government discipline measures those responsible for a chemical spill that seriously polluted the northeastern Songhua River on November 13 last year.

Those to be punished are with the China National Petroleum Corporation and Jilin Provincial Environmental Protection Bureau, but the identities were not revealed.

Around 100 tons of benzene spilled into the river after an explosion in a Jilin chemical plant under the China National Petroleum Corporation left eight people dead and 60 injured.

The river pollution led to the resignation last December of Xie Zhenhua, minister of the State Environmental Protection Administration, the highest-ranking official to leave office for an environmental incident.