China's Ministry of Labor and Social Security is ordering local governments to make up the shortfall in social security funds after striking misappropriations were exposed.

Social security funds still able to be tracked in unauthorized investments should be retrieved immediately, the ministry said.

Local governments, responsible for the management of social security funds, should top up shortfalls themselves if misappropriated funds are lost or unable to be traced, said the ministry.

The National Audit Office published an audit report on November 23, revealing approximately 7.1 billion yuan (US$900 million) of China's two trillion yuan social security funds had been embezzled.

The funds were said to be siphoned off for "overseas investment, commercial loans to companies, construction of government buildings and other purposes".

Liu Yongfu, Deputy Minister of Labor and Social Security, concluded that the essential cause was an inadequate awareness of the significance of social security funds. As a result, state regulations and policies were not strictly implemented in some regions.

"Labor and social security departments, subordinate to their local governments, should take the most blame and rectify malpractice in the management of social security funds," Liu said.

The ministry has ordered all social security funds to be kept in separate accounts and urged local labor and social security departments to draw up plans to improve fund management by the end of December.

The ministry is also preparing to set up an information release system, which is expected to publish the operation of social security funds each season and every year.

It calls for wider media and public supervision over collection, expenditure and all the other aspects of fund management.

The misappropriation of social security funds was highlighted in September by the Shanghai scandal, involving 3.2 billion yuan of city funds, which brought down Chen Liangyu, secretary of local committee of Communist Party of China (CPC).

The social security framework in China includes five main insurance programs: pensions, unemployment, medical, injuries at work, and pre-natal and post-natal care for women workers.